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Apr 27

Mixed reaction to new rail legislation

Posted on Apr 27 By: Gen Handley

Recent changes to rail legislation have generated mixed reactions from rail companies, grain buyers and farmers Credit: CP Rail
A new rail freight act, announced this summer, is generating mixed reactions on both sides of the tracks.

On June 26, the Rail Freight Service Act was passed by the federal government. The bill was aimed at encouraging cooperation amongst railways and shippers while increasing efficiencies in the supply chain.

“Railways and shippers depend on each other to succeed,” said Kelly James, spokesperson with Transport Canada. “The goal of this legislation is to encourage them to work together. Through enhanced collaboration, they can increase the efficiency of the supply chain by adding clarity and predictability to rail freight service.”

The act looks to have greater communication between railways and shippers regarding service needs. In addition, it includes a revised arbitration process that will operate under the Canadian Transport Agency, allowing penalties of up to $100,000 on the railways if an agreement is violated.

Already companies are approaching the new legislation with concern.

Claude Mongeau, president and CEO of Canadian National Railway Co. (CN), said in an official statement that “it is unfortunate that the government has passed this legislation because it is not consistent with a sound public policy agenda that encourages increased productivity and innovation in Canada.”

He went on to state the regulation “could actually chill supply-chain innovation that benefits both the rail industry and its customers.”

Across the tracks, Canadian Pacific Railway Ltd. (CP) sees hard work ahead in order to have the new legislation function properly.

“CP believes this will take a concerted effort by all those involved in keeping it flowing,” said Ed Greenberg, Canadian Pacific Railway Ltd.’s director of media relations. He added that the new regulation would benefit CP by allowing them to more accurately predict rail traffic volumes.

According to Wade Sobkowich, executive director of the Western Grain Elevators Association, more measures are still needed to make railways accountable for substandard performance.

“(Penalties) need to be included in a negotiated service level agreement, covering situations where railways don’t provide enough railcars, or don’t bring the cars according to their service plan,” he said.

Sobkowich added that the $100,000 penalty is “peanuts” to rail companies and doesn’t address the shipper having to deal with poor performance.
Richard Phillips, who was executive director of the Grain Growers of Canada (GGC) when the rail legislation passed, saw the act as a benefit to shippers and an indirect benefit to growers. He labeled the new arbitration process a step up from the past model.

“(The old system) involved going through the Canada Transportation Act and resolution could cost a minimum of two or three years and probably five to $10 million to pursue a case,” he said. “Now you have a faster, lower-cost arbitration. Compared to where we were, it’s a huge improvement. But the Grain Growers of Canada are not sure if it’s strong enough.

“We wanted amendments more clearly defining what the arbitrator could do and couldn’t do, and clearing up some definitions,” he said. “We didn’t get that so we hope the railways and shippers act in good faith and the system works better.”

The act will be subject to review in five years’ time. Sobkowich and Phillips agreed that changes will be required if the act proves ineffective.

“We’re going to watch closely to see what happens,” said Sobkowich. “If it is not doing its job in the next few years, we’ll be back pressuring government.” “

We’ll give it a shot for a couple of years,” echoed Phillips. “But if the railways do not honour the spirit of the legislation, we’ll be back telling the government they need to put our amendments in.”

RAIL CHANGES IN A NUTSHELL

  • The act requires railways to be engaged with the shipper about their service needs.
  • Railways are now required to offer a service agreement to companies shipping goods by rail.
  • If an agreement cannot be reached, shippers now have the option to use a new arbitration process operated under the Canadian Transportation Agency.
    • Under this process, a penalty of up to $100,000 can be issued against the railway.

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