Short-line railways in Saskatchewan want Ottawa to change federal regulations that require Canada’s two largest railway companies to move a million tonnes of grain per week.
Con Johnson, president of the Sask-atchewan Shortline Railway Association, said Ottawa’s million-tonne-per-week directive has had disastrous consequences for short lines in the province.
To meet the weekly quotas imposed by Ottawa and avoid federal fines, Canadian National Railway and Canadian Pacific Railway have developed a predictable response: haul grain from the most efficient main-line elevator locations and reduce service to smaller, more remote shippers, including short-line railway companies.
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“The regulations have to be changed drastically or removed all together,” said Johnson, whose organization met in Saskatoon last week to discuss rail service issues.
“I guess in a way, the regulations were well intended by government. They were getting a lot of flack because grain wasn’t moving last winter, but I think they could have been thought out a bit better.”
The association predicted that CN and CP were going to “pick the low lying fruit first and that’s exactly what they did,” Johnson said.
“They picked the most efficient (concrete terminals) and the big centres to draw out of and they’ve given us what’s left over. It’s cost us a lot of money.”
Ottawa implemented the million-tonne-per-week directive earlier this year, hoping to get grain moving after a horrendous winter that saw the movement of prairie grain slow to a trickle.
The directive was renewed later in the year and is scheduled to remain in place until the end of November, at which time Ottawa will consider another extension.
The directive requires CN and CP to each move 536,000 tonnes of prairie grain per week or face federal fines as high as $100,000 per incident for non-compliance.
In September, Ottawa issued its first fine against CN, claiming the railway had failed to meet its obligations.
In response, CN suggested that demand for rail service from the western Canadian grain industry is no longer high enough to warrant mandatory volume requirements.
That explanation doesn’t sit well with short-line operators.
Many members of the short-line railway association are still facing rail car backlogs that number in the thousands of cars.
Last week, some association members were receiving rail cars that were scheduled to be filled with grain and shipped to market in early May.
“The biggest problem that I see is that our reputation and our credibility is really being hurt by this,” said Doug Tallon, a director with Fife Lake Railway, which owns 100 kilometres of track in southern Sask-atchewan.
“With the change in the (single desk) marketing environment, we saw the opportunity for short lines to really capitalize on this. And it would have happened if we’d had access to reliable railway service,” he said.
“Our business could have easily doubled, so it was really frustrating to see that we were just shut out of the rail car supply.”
Saskatchewan short lines entered the post single desk era hoping to increase revenues by shipping grain directly to buyers in Canada and the United States.
However, executing those sales has proven difficult.
Short lines still rely on the big railway carriers to deliver empty rail cars to interchange locations.
Delivery of empty rail cars to short line interchanges has been sporadic since Ottawa put its million-tonne-per-week mandate in place, said Tallon.
Some short line operators are months behind in filling their sales orders. Others don’t know from one week to the next whether they will be receiving cars or waiting.
Car delays are also causing short-term cash flow problems, with some short lines beginning to wonder how they will cover routine operating expenses.
Uncertainty over rail car availability has also made it difficult to schedule train crews and grain deliveries from farmers.
Farmers who have made arrangements with custom truckers are often left in the lurch.
“It’s just a logistical nightmare,” said Tallon. “And it’s been going on for months now. I don’t know how we’ll catch up or get any credibility back as a reliable supplier.”
He said grain that would normally be moved on Fife Lake’s track is instead trucked by farmers to main-line elevator locations where rail car supplies are abundant.
The biggest grain shipper on Fife Lake Railway is still filling rail cars that were supposed to be shipped in mid-May.
Meanwhile, main-line terminal operators at the Fife Lake–CN interchange near Assiniboia, Sask., are up-to-date and clamouring for grain to fill cars that are empty and waiting.
Johnson, vice-chair with Great Western Railway at Shaunavon, Sask., said that is a common scenario for his short line.
He said lack of reliable service to short-line railways is a key factor behind the startling price differential between high quality durum sold in Canada and the prices offered at U.S. locations just south of the border.
