Transport changes get good reviews

Bill C-49, formally known as the Transportation Modernization Act, passed in the spring of 2018 with the promises of more transparency from the railways, reciprocal penalties within service agreements and long-haul interswitching options, among others.
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Grain industry players say the legislation that modernized transportation regulations two years ago is generally working as intended.

Bill C-49, formally known as the Transportation Modernization Act, passed in the spring of 2018 with the promises of more transparency from the railways, reciprocal penalties within service agreements and long-haul interswitching options, among others.

Farmers applauded the changes, saying it would improve competitiveness and maintain Canada’s status as a reliable shipper.

Wade Sobkowich, executive director of the Western Grain Elevator Association, said it has made a difference.

“If you remove some of the factors such as labour disruption that we’ve seen with CP (Canadian Pacific Railway) and CN (Canadian National Railway), if you remove the blockades, and you remove the washouts and some of these other things that are not 100 percent in the railways’ control, I would say that overall in the last two years, service has been better,” he said.

But whether that’s due to the legislation or other factors is up for discussion, he added.

For example, he said long haul interswitching hasn’t been effective because no one has applied to the Canadian Transportation Agency to use it.

Sobkowich said the CTA has done one investigation but it applied to the forestry industry only, so it hasn’t had a direct impact on grain movement.

The other key provision was service level agreements with reciprocal penalties. He said they aren’t negotiated quickly enough to have true reciprocal penalties in place.

“Those were the key provisions and none of them in and of themselves is having an impact,” he said. “What I would say is having an impact is that the railways are making more of an effort to put on more capacity because of the fact that those provisions are in place in the first place, even though they’re not being used.”

James Cairns, senior vice-president, rail centric supply chain, at CN, said C-49 measures worked for the railways because they created stability and encouraged investment.

“I think the big takeaway here is we got away from that free rider scenario,” he said, referring to the Volume-Related Composite Price Index that benefitted both major railways if only one invested.

“We’ve seen significant investments by both railways in Canada in new hopper cars,” Cairns said. “That really is a game changer for the industry.”

That led to investment by other players, including more west coast capacity, new country infrastructure and new track facilities.

A statement issued by CP echoed similar sentiments.

“In June 2018 (a month after the bill passed) CP announced a $500 million investment over four years to purchase 5,900 high-capacity hopper cars, enabling a complete removal of all low-capacity government of Canada owned hopper cars from the fleet,” the statement said.

To date, the company has more than 3,300 of those cars, along with some leased high-capacity cars.

CN initially bought 1,000 cars and then another 1,500.

Both companies say they are moving record grain volumes as a result of C-49 and this investment in capacity. CN moved more grain in October than any month in its history.

“That is really the measure when you decide was (C-49) successful or not,” said Cairns.

He also said that the legislation’s requirement for railways to be more transparent and accountable through specific grain and winter movement plans has been positive.

“These are laborious activities for sure but very, very good,” he said. “This is forcing collaboration and communication for all stakeholders in the grain supply chain.”

CN’s plan calls for 6,600 cars per week generally and 5,600 in winter.

Sobkowich said those plans tend to be best-case scenarios.

“We rarely see them hit those numbers.”

He said COVID-19 slowdowns in other sectors seemed to have made room for more grain on the rail lines, but Cairns said the real reason is that the newer cars carry up to 30 percent more grain.

Sobkowich said there are a few things to work on in the future.

Shippers would like to begin discussions with railways on service level agreements much earlier so they are in place at the appropriate time.

He said talks would have to start in December or January to have an agreement with reciprocal penalties in place for the beginning of the crop year in August.

For example, he said shippers don’t get dedicated train program documents from CP until a month before the crop year starts.

“There’s very little time to take a look at it and say this is what we want to change,” Sobkowich said.

At CN, Cairns said that isn’t a hindrance to increasing supply chain capacity, which is what everyone wants.

Sobkowich added that the new act “moved the needle in the right direction.” Shippers had wanted to retain extended interswitching and will continue to press for changes like that to obtain more competitiveness.

“It’s important that C-49 adopted the changes that it did and we can use that as a launching point for even further changes,” he said.

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