CNS Canada — Western Canada’s shortline railways are getting the short end of the stick as they struggle to meet their own commitments moving grain and other products along their tracks.
A backlog of grain on the Prairies over the past winter, linked in part to poor rail movement, prompted the federal government to implement legislation requiring the country’s two major railways (Canadian National and Canadian Pacific) to increase their weekly grain handling in order to deal with the situation.
The Fair Rail for Grain Farmers Act requires both CN and CP to each move 500,000 tonnes of grain per week or face fines. There have been some concerns raised over the relatively cheap financial penalty (now at $100,000 per violation). There have also been a few cases where the quotas were not met, but in general the legislation has met its broad goal of seeing more grain move.
However, an unintended consequence of the legislation has seen CN and CP focus their attentions on the “low hanging fruit” of moving grain along their main lines, where there are fast turnaround times, at the expense of other business.
“The legislation was a knee-jerk reaction, and has proved very disruptive to the transportation system as a whole,” said Sheldon Affleck, president of Big Sky Rail Corp. and Mobil Grain in Saskatchewan.
The shortlines are reliant on CN and CP to deliver rail cars to their lines.
All of the large elevators on the main line are getting a steady supply of cars, but “the shortlines are getting the short end of the stick,” said Roger Gadd, general manager of Saskatchewan’s Great Western Railway.
“We’re still trying to catch up with last year’s crop, and we’ll probably never catch up this year,” said Gadd. His railway, which links to CP, could usually count on at least one train load of cars a week, but didn’t even receive any cars during the past week.
Deliveries were inconsistent when they did come, he said, and estimated that GWR was about 1,500 cars behind.
While Great Western was dependent on CP for its cars, Gadd didn’t blame the larger railway for the current backlog, as it was simply doing what was best for its own business under the current legislation. Rather, he placed the blame on the federal mandates themselves.
“Whenever you have government regulation, you do certainly get unintended consequences,” added Lee Jebb, vice-president of railway operations with Cando Rail Services, which runs the Central Manitoba Railway. “If you’re under orders to move a lot of wheat, you’ll move it to places that make the best utilization of your cars.”
His shortline could provide a quick turnaround, he said, but noted other lines located farther off the beaten track were having issues.
One additional consequence of the grain legislation is that customers moving other products, such as fertilizer, have been de-prioritized, said Jebb.
Difficulties moving grain and other products to the U.S., which has a longer turnaround time, were another issue, according to Affleck.
“If you believe in the free enterprise market, just let it go and don’t regulate things to death,” he said, “because then you’re just adding one regulation on another regulation on another regulation, and putting out fires, and listening to complaints, on and on.”
The current legislation runs out Nov. 29, but could still be extended. Affleck was hopeful the mandates would die out at that point, noting that the legislation has also created animosity between the railways, grain companies, and farmers that could have been avoidable.
“We need ideas on how to make things move smooth, not how to force people to do this, that, or the other thing,” said Affleck.
— Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.