Both national railways say there is no need for a review of the cost of moving grain, which has been requested by the Canadian Wheat Board and a number of farm groups.
The rail companies say it would represent a step backward, toward re-regulation of the grain industry.
“Canada has been moving towards a more commercial system for 25 years,” said Canadian National Railway spokesperson Jim Feeny.
“They want to turn back the clock, and on one sector of the industry only, in the railways.”
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The regulated system of the 1970s was costly and inefficient for farmers, rail companies and taxpayers, he said, and there is no reason to believe it would work any better now.
Breanne Feigel of Canadian Pacific Railway agreed, saying a costing review would be a move in the wrong direction.
“The Canadian economy needs less regulation, not these kind of archaic solutions,” she said, adding that the call for a costing review is “just more of the same” from the CWB.
She said grain should be treated in a commercial manner, the same as other commodities.
Last week, the CWB and a coalition of farm groups led by the Canadian Federation of Agriculture called on the federal government to undertake a formal review of the railways’ costs of hauling grain.
The last such review was done in 1992 and adjusted slightly in 2000. Those numbers are still used today in calculating the railways’ allowable revenue under the revenue cap.
The coalition released a study by U.S.-based Travacon Research Ltd., which stated that as a result of the outdated formula, railways are earning more than 50 percent over their costs. The groups say 20 percent would be a more reasonable figure.
Feeny said CN rejects the conclusions reported in the study.
“We don’t believe the consultant is in any position to know or understand the situation,” he said, noting there was no consultation with the railways in the preparation of the study.
He said even if it was asked, there would be no point in providing information to Travacon because the railway rejects the notion of a costing review and continued regulation of its grain-hauling business.
As a result of recent regulatory decisions, such as the proposed $72 million reduction in the revenue cap to reflect hopper car maintenance costs, he said, grain is becoming one of the railway’s least profitable sectors.
Feeny said the railway is also unhappy over the upcoming service review as required in legislation passed by Parliament last month.
He said despite service disruptions caused by severe winter weather, CN has moved seven percent more cars to the West Coast than it had at the same point last year, and five percent more than two years ago, a year of record movement.
He added that rail rates in Canada are lower than in the U.S. and “among the lowest” in the world.
Feeny complained that every time there is a delay in grain movement the railways get all the blame, when other factors, such as terminal congestion and weather, can be at fault.
The Western Canadian Wheat Growers Association joined in the call for a costing review last week, saying both price and service issues need to be addressed.
“The development of good transportation policies can only happen if we examine price and service issues together,” said Con Johnson, chair of the association’s transportation committee.
The Grain Growers of Canada said the government’s top priority should be the upcoming service review. Once that is complete, the industry can turn its attention to the costing issue.
“We’re not opposed to the costing review but we think the level of service is a bigger issue that could put more money into farmers’ pockets,” said executive director Richard Phillips.
