A panel that spent a year and a half reviewing the Canadian Transportation Act got its key recommendations wrong.
That’s the reaction from farmers, including Alberta Wheat Commission chair Kevin Auch.
“We need to have some measure of a level playing field in the whole rail transportation thing,” said Auch, who farms near Carmangay.
“We’re basically dealing with two monopolies. If we remove some of the regulations that help level the playing field, we might end up with a monopoly situation where they charge as much as they can, to the point where it’s not economic for shippers.”
The provincial wheat commission, along with other Prairie farm groups, are worried about recommendations to phase out the Maximum Revenue Entitlement (MRE) — also called the revenue cap — over seven years and to shorten interswitching access. But they welcome proposals to improve the MRE in the interim, extend shipper protection to producer cars, and enhance short line railways.
Getting rid of the revenue cap will encourage investment and spur efficiency, the review panel’s report said.
“The eventual elimination of the Maximum Revenue Entitlement will finally place the grain sector on an equal footing with all other commodities transported by rail in Canada,” the report says. “An unfettered commercial framework provides greater assurance that supply chain partners who handle and transport grain will invest in innovative supply chain solutions to move grain efficiently in years to come.”
But phasing out the revenue cap would allow CP Rail and CN Rail to “charge whatever they want,” said Auch.
“What the Maximum Revenue Entitlement does is that it caps per car what the railroad can charge,” he said. “There’s still a good profit in each car and it doesn’t really fit its name. People think that this limits the amount of money they can make, but that’s not true. It’s unlimited. Basically the more cars they ship, the more money they make.”
Alberta Wheat, the Western Canadian Wheat Growers Association, Western Barley Growers, and Manitoba farm group Keystone Agricultural Producers also oppose the report’s recommendation to allow interswitching distances to go back to 30 kilometres from the current 160.
The review panel, headed by former Liberal and then Conservative cabinet minister David Emerson, said the Canadian Transportation Agency has found that “very few shippers have availed themselves of the extended limits to date, thus it is expected there will be little impact if they are ‘sun-setted.’”
But the head of the federal rail monitor recently said there has been more interswitching than expected. Reducing it would only further reduce competition between the railways, said Auch.
“You’re still only dealing with two railroads, so the 160-kilometre interswitching is just them going into each other’s territory by 160 kilometres,” he said. “It’s not a free market or an open market, but it leaves something. Getting rid of that, it just strengthens the monopoly situation (and) weakens the position of the shippers.”
While the report acknowledges grain shippers’ complaints about poor rail service, it doesn’t recommend regulatory solutions, including reciprocal penalties for railways when they fail to live up to service agreements.
“We would like reciprocal penalties,” said Auch. “Right now, if a shipper doesn’t fill the car on time, there are penalties — as there should be.
“On the other hand, there are no penalties on the railroads for not delivering cars. Just this last week, there were about 2,200 hopper cars where the orders weren’t filled between CN and CP. This happens all the time.”
Federal Transport Minister Marc Garneau said he wants to consult further before acting on the review panel’s recommendations.
“Collaboration with all key partners will be essential to move forward and ensure Canada’s transportation system is well positioned to capitalize on global opportunities, contribute to a high-performing economy, and meet the evolving needs of Canadians,” said Garneau.
The promise to consult was welcomed by farm groups.
Many are also hoping veteran Saskatchewan Liberal MP Ralph Goodale (now the minister of public safety) will advocate in cabinet to retain the revenue cap and offer other shipper protections — things he strongly backed while in opposition.
Alberta Wheat “is in favour of anything that increases competition,” said Auch.
“We’re on the open market, and the open market tends to build efficiencies and the efficiencies get passed on in the value chain,” he said. “What we’re not in favour of is allowing the railroads to abuse those monopoly powers.”