Small grain shippers have once again prevailed in a level of service dispute against Canadian National Railway and this time they are expecting sweeping changes to the way the railway does its business.
In a July 6 decision, the Canadian Transportation Agency ruled CN breached its statutory obligations to provide Great Northern Grain Terminals Ltd. (GNG) with adequate rail service.
Bruce Horner, chief executive officer of GNG, was elated with the judgment.
“I think it’s good for farmers and I think it’s good for small grain companies,” he said.
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Horner contends CN’s rail allocation policies cost his Nampa, Alta., grain company $4.5 million over the past three years.
In its written submission, GNG claimed its freight bill was an estimated $13.21 per tonne more than a large shipper in a nearby community. The company said it would have to close its doors if that disparity wasn’t fixed.
“We can now maybe look forward to growing our business to the potential that it has,” said Horner, moments after hearing about the CTA ruling.
This is not the first time CN has had its hands slapped by the federal regulator for failing to provide adequate service to a small shipper.
Naber Seed & Grain Co. Ltd., a Melfort, Sask., special crops shipper, won two level of service complaints against the railway.
But those decisions had little impact on the broader shipping community partly because Naber went into receivership one day before the second decision came down and partly because the language in those rulings wasn’t as far-reaching, said Trent Weber, director of transportation and marketing for the Inland Terminal Group.
“The Naber decision wasn’t treated as systemic. It was viewed in isolation,” he said. “As a result there was really no changes to the grain industry.”
He is more optimistic that the GNG ruling will lead to lasting changes and better treatment of small grain companies.
“It means that other shippers that suffer similarly to GNG can ask for relief more easily,” said Weber.
The federal regulator ruled that the railway had discriminated against small shippers by dropping a program that allowed shippers to forward book 50 rail cars at a time and by implementing an incentive program for companies that can load 100 cars for a minimum of 30 consecutive weeks.
“The agency finds that CN’s current car distribution options constitute a significant deterioration in the service options previously enjoyed by GNG,” said the CTA.
To remedy that injustice, CN has been ordered to implement a program whereby GNG can order blocks of 50 rail cars in advance and allow the shipper to trade cars with other companies. The railway must also advise GNG and other shippers of the methodology it uses in determining how to allocate rail cars.
All of those changes are to be made by the beginning of the new crop year Aug. 1.
But the agency didn’t stop there. While its jurisdictional scope was limited to ruling on GNG’s specific service complaint, the CTA said, “the nature of CN’s conduct has undoubtedly affected other grain shippers.
“Ideally, this finding, as it relates to GNG and the industry overall, will encourage new open dialogue between CN and its shippers so that any car supply issues can be reasonably met without the need for a proliferation of service complaints before the agency.”
That paragraph is the one that will make a difference, say GNG and the 20 other shippers, commodity groups, governments and marketing agencies that intervened on its behalf.
Some contend it already has, noting that June 29, CN reintroduced its GT Secure Export program, which allows grain elevator companies to book blocks of 50 rail cars headed to Vancouver and Thunder Bay.
CN spokesperson Jim Feeny declined to comment on the decision but said CN’s programming change was part of the company’s continually evolving offerings and had nothing to do with the CTA ruling.
Mark Dyck, manager of rail logistics with the Canadian Wheat Board, finds that explanation tough to swallow.
“I think it’s a little suspicious. They had gone away from the GT Secure program and now in 2007 they want to reintroduce it. I think this case definitely had some impact on that.”
Dyck said there is a clear message in the decision that the railway’s discriminatory car allocation policies will not be tolerated.
“They’re basically saying, ‘let’s get this fixed, CN.’ “
That’s the most rewarding part of the decision for Horner.
“I’m pleased for all of the interveners that came along with me because they ruled it to be systemic, which means (other shippers) should be entitled to the same recourse,” he said.
