Farm groups continue to support penalties, but size of the fines and where the money goes raises frustrations
Canada’s two largest rail companies have been fined $150,000 for failing to meet the weekly grain movement targets that the federal government established last year.
However, based on reactions from Western Canada’s farming community, it’s unlikely prairie grain growers will be uncorking the champagne any time soon.
General farm groups in Alberta and Saskatchewan said last week that the fines levied by Ottawa will do little if anything to enhance railway accountability or ensure better service.
The penalties — $100,000 against Canadian National Railway and $50,000 against Canadian Pacific Railway — are small compared to revenues derived from moving grain, they added.
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CP has already indicated it will dispute its $50,000 fine.
Alberta Federation of Agriculture president Lynn Jacobson said there is no reason to believe that fines of $50,000 or $100,000 will influence the performance of companies that collect billions of dollars annually moving western grain.
However, a fine of any size is probably better than no fine at all, he added.
“It’s more about the principle — the fact that Ottawa can fine them — rather than the amount of the fine itself,” said Jacobson.
“The fact that CP is appealing the fine is no surprise really.… If they don’t appeal, then it sets a precedent and sends the message CP is accepting the fact that government is allowed to issue fines against them.
“That’s been one of (CP’s) key talking points, is that they don’t think government has any right to regulate railways, in any way, shape or form.”
Agricultural Producers Association of Saskatchewan president Norm Hall offered a similar view, saying the fines against CN and CP send a message that Ottawa is watching railway performance.
That said, the size of the monetary penalties is probably irrelevant, he added.
“We’re a little disappointed with the size of the fines, but overall, at least there was a fine imposed,” he said.
Hall said the $50,000 penalty imposed against CP is less than what CP president Hunter Harrison earns in a single afternoon.
“I think farmers would at least feel a bit better if the money collected through fines didn’t go directly back into government coffers,” Hall said.
“That’s something that needs to be fixed.”
Under a federal order that took effect last March, CN and CP were required to move 536,000 tonnes a week of western Canadian grain during most of the 2014 calendar year or face fines as high as $100,000 per week for non-compliance.
Last week, Transport Canada announced that CN twice failed to meet the weekly grain movement target: the last week of July and the second week of September.
CP’s only infraction occurred between Sept. 7 and Sept. 13.
CP said a day after Transport Canada announced the fines that it will dispute the $50,000 penalty.
Company spokesperson Jeremy Berry said in an email that his company’s failure to meet federally imposed grain targets were the result of “broader supply chain issues, specifically the Labour Day holiday shutdown at the Port of Vancouver the week before.
“These events outside of CP’s control in the supply chain contributed to delays in the movement, loading and shipping of railcars on CP.… CP has stressed and will continue to stress that the Canadian grain supply chain must operate on a 24-7 basis to support balanced pipelines, reduce congestion and drive velocity.”
CN spokesperson Mark Hallman said “CN will pay (its) two fines totaling $100,000 and will move forward, continuing to focus on efficiently moving western Canadian grain to market.”
The company said it was pleased Ottawa issued fines of $50,000 per infraction rather than the $100,000 maximum.
“CN is heartened that the Transport Canada enforcement officer’s investigation appropriately took into account factors beyond CN’s control and also reflected the important role that others play in the grain supply chain.”
Jacobson said grain farmers and agricultural shippers are pinning their hopes for better rail service on a review of the Canada Transportation Act, which is currently underway.
“We’ve got some high hopes in the ag community that the CTA review process is maybe going to make a difference,” Jacobson said.
Farm groups have been pushing for a system that allows shippers to sign contracts based on reciprocal financial penalties.
Under that scenario, shippers and rail carriers would be subject to financial penalties if they fail to uphold the terms of a negotiated shipping contract.
Meanwhile, CP and CN said grain shipments during the 2013-14 crop year exceeded all previous records.
“In 2014, (CP) moved record amounts of grain: 21 percent over the three year average and up 16 percent over the previous record crop year of 2008-09,” the company said.
Added CN: “… By the end of December 2014, CN had just 1,500 grain orders on its wait-list to fulfill, the equivalent of only about three days of grain movements.”
brian.cross@producer.com
