of The Crossroads
Agriculture industry groups are applauding new rail transportation legislation amid their ongoing concerns with getting Canadian grains to port.
The Transportation Modernization Act (the act) came from Bill C-49 and the act received royal assent on May 23 after a lengthy discourse between the House of Commons and Senate that held up the long-awaited legislation for several weeks.
Transport Canada released a statement from Marc Garneau, the minister of transport, on May 23. The act includes amendments to the Canada Transportation Act among others, and it has an impact on all transportation on land, sea and air. The act provides for a more fair, efficient and safer freight rail system and the minister alluded to the benefit new legislation is going to have for moving commodities.
There have been well documented concerns about the ability of the Canadian National Railway (CN) and Canadian Pacific Railway (CP) to move grain. As noted by the agriculture industry, the act will help to improve the country’s rail freight system through measures such as the ability to apply reciprocal penalties to CN and CP.
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According to agricultural groups, other beneficial measures in the act include provisions for extended or long haul inter-switching, increased data transparency from railways and added power to the Canadian Transportation Agency (CTA) to respond to freight concerns.
Wade Sobkowitch, executive director of the Western Grain Elevator Association (WGEA), said the legislation has been in the works for more than a year, but the WGEA has been working to address rail service concerns for the past 15 years.
The WGEA represents the largest grain shippers operating in Western Canada. Sobkowich said the legislation had been reviewed several times in the past, but it has taken a long time to get changes in place with a lasting affect on rail service and benefit to stakeholders.
“It’s a milestone for sure to have the final page in this chapter closed and start a new chapter in rail service and rail capacity,” he said about the legislation. “We’re in uncharted waters, but hopefully it does what we intended it to do and that is bring about some balance in accountability between shippers and railways.”
He noted that the legislation should create a more commercially-based relationship between the railways and shippers. The dual monopolies of CN and CP have prevented a commercial-like relationship in the past, he said.
Sobkowich said the disciplines of competition were not present in the rail freight market, so shippers needed the legislation to act as a surrogate to create competition. Stakeholders such as shippers did not get everything they asked for in the legislation, but the new provisions are a good start.
“It’s good enough that we want to lock it in place and start using the provisions,” Sobkowich said. “There will be cracks. They will become evident, and then we’ll have to continue to press for future changes to the Canada Transportation Act in the next iteration.”
The WGEA executive director said shippers do not want to get paralyzed in the pursuit of perfection because the legislation is good enough to make a difference. He said it could not be worse than legislation previously in place.
Shippers now have the ability to negotiate balanced service agreements with railways and if the negotiations fail, shippers now have an ability to take the contract to an arbitrator to get binding arbitration in place on the terms of the contract including the reciprocal penalties.
Sobkowich said the legislation works for all shippers and commodity-based industries. He added that the legislation has a definition for what it means for railways to provide “adequate and suitable accommodation” unlike the previous iteration.
Jeff Nielson, president of the Grain Growers of Canada, said the changes will help to provide a brighter future to producers, so the organization recognizes the federal government for bringing the legislation forward, the House of Commons for moving it along and the Senate for bringing forward key amendments.
He noted that it would have been better to have the new legislation in place in January to allow stakeholders to prepare for the new crop year starting in August. It will take time to get provisions in place and producers still have a backlog of grain in their bins.
According to Nielson, the combination of new provisions in the act are important and the organization does not consider any provisions to be more important than others. It has been 30 years of waiting, so it is important.
“This is a big difference and we are more than willing to work with this (act) to improve the situation with grain handlers and grain farmers and shippers,” he said, recognizing there will be bugs to work out and it is time to get the legislation in action.
Nielson said CN and CP had to share hopper cars under the former legislation, but now each railway could purchase its own hopper cars without being forced to share them. Soybeans have been added to the Maximum Revenue Entitlement, so it is another important change to the legislation, he said.
Todd Lewis, president of the Agricultural Producers Association of Saskatchewan, said the new legislation is good news for producers because the demand for grain from the province has been increasing and the demand is not slowing down.
“It’s been a long-term process to get to this stage,” he said, recognizing that the association is viewing the changes as a long-term solution. “Hopefully it’s a framework that can be worked with now that will give shippers an opportunity and, certainly, farmers an opportunity to be able to get better service.”
He noted that CN and CP have to present their plans to the government for dealing with grain shipments at different times of the year, and now the CTA has been given expanded powers to hold both railways to account with respect to their planning.
The framework in the act is attractive, so now it is a matter of waiting to see if the regulations provide a practical solution to poor rail service, Lewis said. He agreed with Nielson that the combination of provisions is the important aspect of the act and the association hopes the changes have an impact soon.