‘Immediate’ penalties urged for railways on grain delays

The Alberta government is calling on federal lawmakers to impose a system of “immediate” cash penalties against railways that don’t meet obligations on grain delivery.

The province’s agriculture minister Verlyn Olson is booked to meet Monday in Winnipeg with his federal counterpart, Gerry Ritz, plus representatives from the grain industry and Canadian Grain Commission.

Up for discussion is the performance of Canada’s two main railways, Canadian National and Canadian Pacific (CN, CP), in the wake of last fall’s record harvest and subsequent cold snaps, leading to marked delays in grain movement and grain car delivery.

The provincial government said Friday that Olson plans to call for federal legislative changes “to ensure all segments of the grain transportation system are held financially accountable for inadequate service.”

Railways today are “not assessed immediate penalties when they fail to meet their grain-delivery obligations,” he said in a release, noting producers and grain elevator companies are hit with demurrage charges and other fees on late delivery to ports, and that producers also see reduced cash flow due to grain backlogs at the elevator level.

The current federal Fair Rail Freight Service Act provides for fines to be levied against the railways for poor service, but the Act’s provisions “are not adequate” and are also subject to a lengthy arbitration process, Olson said.

Furthermore, he said, any penalties charged to the railways under the current system would be paid to the federal government and yield no compensation for grain growers or grain companies.

The new penalties Olson proposes would be tied directly to delays in service. “I’m not saying we should penalize the railway companies for the sake of penalizing them,” he added.

Farmers on the Prairies are often also captive customers to just one of the two major railways, which means there’s “no competitive incentive for the railways to up their game,” he said.

“I’m not saying the railway companies don’t have their own challenges; they certainly do,” Olson said on a conference call Friday, noting the railways have cited severe winter weather conditions slowing train movement.

However, he added, “I don’t think that in Western Canada, we can let ourselves be surprised that we have bad weather in winter.”

“Everyone’s unhappy”

Asked whether he’s heard similar complaints from other sectors relying on rail freight, Olson emphasized that “everyone’s unhappy.” He also noted “coffee shop talk” suggesting increased movement of crude oil by rail has been somehow “prejudicial to the movement of grain… (but) I think the people who actually know say it’s not particularly an issue.”

Olson’s announcement follows similar calls last week from the Saskatchewan government, which named a cabinet delegation to meet with grain companies on “potential solutions” and urged the companies to pursue level-of-service contracts with railways through the Fair Rail Freight Service Act.

The federal government recently announced it would order more frequent reporting of information on grain handling and transportation. If improvements don’t come from that move, Saskatchewan said it would also call on Ottawa for “potential legislative action to ensure all stakeholders throughout the supply chain are held accountable.”

The Saskatchewan delegation said it would also continue meeting with railway representatives and seek short-term measures to clear up the current backlog of grain, including “adding crews, cars and locomotive capacity as necessary.”

The province said it would also urge the railways to make “long-term plans for the future, as it is anticipated large crops will become the new norm,” including plans for surge capacity and “weather challenges.”

Olson’s Manitoba counterpart Ron Kostyshyn last week echoed those concerns in a release, noting “many Manitoba farmers had high-yield, good-quality crops last year but poor rail service and transportation delays mean most of it is still in the bin.”

Olson on Friday also noted recent calls from industry groups such as the Canadian Canola Growers Association for changes to the federal Advance Payments Program to improve cash flow for Prairie grain growers.

Such changes would include raising the ceiling on advance payments and on the interest-free portion of those advances, and allowing producers to carry “overlapping” advances. — AGCanada.com Network

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