Service level agreement | Producer groups and grain shippers want financial penalties included in 
the Fair Rail for Grain Farmers Act
Ottawa is not interested in increasing weekly grain targets that specify how much grain Canada’s major railways must haul.
However, there is a strong likelihood that the federal government will use a heavier hand in arbitrating service level agreements between shippers and railways.
“The volume requirements (of one million tonnes a week) were not chosen arbitrarily,” federal agriculture minister Gerry Ritz said during a Saskatoon news conference March 27.
“This is a tonnage commitment made by CN (Canadian National Railway) and CP (Canadian Pacific Railway) that will move grain in an efficient manner while not hampering the movement of other commodities.”
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Saskatchewan agriculture minister Lyle Stewart had earlier said he had hoped Ottawa would increase weekly grain targets beyond a million tonnes, or roughly 11,000 grain cars per week.
Stewart also encouraged the federal government to increase fines that can be imposed on railways if they fail to meet the federally imposed grain movement targets.
But following a March 27 meeting with Stewart and other stakeholders, Ritz said the million tonne grain targets and the fines for non-compliance would not be changed.
“On the penalty side … (the $100,000 penalty) is a number that is used across government so to set a precedent on one situation here is probably not the solution,” Ritz said.
“The real solution is service level agreements that are commercial in status.”
Ottawa’s proposed rail legislation, the Fair Rail for Grain Farmers Act, is in committee this week and is expected to receive expeditious treatment.
Both Liberal agriculture critic Ralph Goodale and NDP critic Malcolm Allen have indicated that their parties are unlikely to oppose the bill, although amendments may be required.
Conservative MP David Anderson, who represents the Saskatchewan riding of Cypress Hills-Grasslands, has already suggested that the bill should be amended to ensure better service for short-line rail companies operating on the Prairies.
Some short-line operators have expressed concerns that minimum weekly targets could result in reduced rail service to small rail carriers who depend on major railways to complete their hauls.
Short-lines feel that major rail companies will focus their efforts on main line hauls and areas that are closest to export terminal to maximize volumes and avoid financial penalties.
The act is also refocusing attention on the need for service level agreements, which define the commercial obligations of shippers and rail carriers.
A key element of the proposed legislation is a provision that could give the Canadian Transportation Agency an expanded role in arbitrating such agreements between shippers and railway companies.
Grain shippers have been calling for legislative amendments that would give them more power to negotiate service levels agreements (SLAs) that include financial penalties.
They say railways are not inclined to negotiate service contracts that could result in financial penalties in the event that railways fail to provide the level of service that has been promised.
The act makes specific reference to SLAs and gives “the Canadian Transportation Agency the authority to regulate prescribed elements” in arbitrated agreements.
Details of that expanded authority are currently being discussed and could be in place as early as mid-April, Ritz suggested.
“I’m not going to give you a specific date but things are moving fairly quickly,” he said.
“There’s a tremendous non-partisan push to have a lot of this well in hand before the Easter break, which is … three weeks away.”
Stewart called the Saskatoon meeting with Ritz and other shipper groups productive.
“I think … everybody understands better now … what’s exactly happening with the (order in council), and the legislation that’s been tabled, and the time frames to get regulations built around that,” Stewart said.
He said he felt reasonably assured that financial penalties would be included in arbitrated service level agreements.
“I certainly got the feeling that the minister (Ritz) wants that, for sure,” he said.
