Canada’s second largest railway wants Ottawa to remove the revenue caps that limit how much money it can generate by hauling a tonne of western Canadian grain.
Canadian Pacific Railway said the maximum revenue entitlements (MREs) that the federal government established 15 years ago place an artificial limit on how much the railway could earn hauling grain.
CP said the regulatory limits are preventing it from investing in infrastructure and new rolling stock that would allow it to haul grain more efficiently.
MREs, which have been in place since 2000, were intended to protect farmers and grain handlers from rising shipping costs.
Read Also
Manitoba beekeepers battle for survival
Honeybee colony losses have hit 43 per cent, making 2025 the latest in a string of poor bee survival years for Manitoba’s honey producers
However, CP said the Volume Related Composite Price Index, which is a key factor used to calculate MREs, has since increased by 22 percent, only slightly more than the rate of inflation.
By comparison, the average price of other farm inputs, including fertilizers, fuel, machinery and buildings, has increased by 48 percent.
“The intent of the MRE is to put an effective cap on rail freight rates for grain and, therefore, to depress revenue earned by railways for the movement of grain,” CP said in its submission to the Canadian Transportation Act review panel.
“The removal of the MRE would allow for increased investment, capacity and overall competitiveness in the grain supply chain.”
CP’s submission also calls for:
- The removal of weekly grain movement targets after Aug. 1, 2016.
- The elimination of expanded interswitching provisions.
- The harmonization of Canadian railway regulations with U.S. regulations.
Other groups, including some grain producers, have also called for the removal of the railway revenue cap. They see it as a potential impediment to timely, reliable and affordable railway service.
However, most grain growers and shipper groups see the caps as an assurance against rising fright rates, especially in areas that are only served by one railway.
Wade Sobkowich, president of the Western Grain Elevators Association, said removing the caps “could and probably would” result in higher freight rates for farmers and grain handlers.
“We are of the view that the revenue entitlements are a good thing,” said Sobkowich, whose organization represents western Canada’s largest elevator companies.
“We’ve seen what happens when we’re dealing with a monopoly environment, from a shippers perspective. If it was a competitive environment then … (we wouldn’t need) that regulatory force in play.… (However, as it stands), we don’t believe that the removal of the revenue entitlement in and of itself would result in better service.”
The fate of revenue caps was widely expected to emerge as a topic of interest during the CTA review process.
The panel in charge of reviewing the act is expected to submit its report to government before the end of the year.
Transport Canada adjusts railway revenue entitlements every year to allow for increased costs incurred by Canada’s Class 1 railways carriers.
The caps are applied only on grain that is shipped to Thunder Bay, Ont., and the west coast ports of Vancouver and Prince Rupert.
Grain shipped through Churchill, Eastern Canada and to markets in the United States is exempt.
