Federal Legislation Promises Improved Rail Service

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After months if not years of lobbying, the grain industry got what it wanted Mar. 18 – government action on rail service. And while shippers say they’re cautiously optimistic, some organization officials say it’s exactly what they’ve asked for.

At an announcement made at a Paterson elevator near Winnipeg, Agriculture Minister Gerry Ritz, accompanied by Minister of State for Transport Rob Merrifield, said the federal government would introduce legislation giving all railway shippers the right to a service-level agreement with the railways, including penalties for poor performance.

It goes further than what the government’s own panel reviewing rail service recommended in its final report made public last week.

“For far too long, government believed that it knew better than the industry,” Ritz said. “Not anymore. You will see that our response is a balanced, commercial approach, built off of industry recommendations.”

And it is, said a jubilant Richard Phillips, executive director of the Grain Growers of Canada.

“This is virtually everything we asked for,” he said in an interview. “We’re pretty pleased with this.”

So is Pulse Canada. “The bottom line is this government listened and is taking action,” said Pulse Canada’s executive director Greg Cherewyk.

The government’s plans flow from its review of rail service, which began in 2008 with gathering data on railway performance. A three-person review panel was appointed to assess the data, review industry submissions and make interim and final recommendations.

The federal government said it accepts the panel’s commercial approach and its four key elements:

Railways should provide 10 days’ advance notice of service changes.

Railways and stakeholders should negotiate service agreements.

A fair, timely and cost-effective commercial dispute resolution mechanism should be developed.

Supply-chain performance should be monitored through enhanced bilateral performance reporting between shippers and railways, and through public performance reporting.

The panel recommended the government initiate a six-month facilitation process for shippers and the railways to develop service- level agreements.

If agreements aren’t made then the government can legislate them, the panel said.

The government said it will introduce a facilitation process to develop a template service agreement. However, it will guarantee the right to an agreement, including an arbitration process to establish an agreement, should commercial negotiations fail.

“What we’re to do with the legislation is to have a backstop for making sure a negotiated settlement contract is actually achieved,” Merrifield said in an interview. “The hope is the bill is never even needed.”

Panel agrees

Farmers and grain companies have long said they need such agreements to rebalance the railways’ dominant market power.

The panel agreed.

“Moreover, the panel also concludes that many, but certainly not all, of the problems relate to the performance of CN and CP,” the panel’s final report states.

The panel also says service suffers due to a lack of railway competition.

“(T)he panel concludes that railways continue to have market power over some of their customers… where competitive alternatives are limited or lacking altogether (and)… results in an imbalance in the commercial relationships between the railways and other stakeholders.”

The federal government also announced it will establish a Commodity Supply Chain Table to address logistical concerns and develop performance measures to improve competitiveness.

In collaboration with Agriculture and Agri-Food Canada, Transport Canada will lead an in-depth analysis of the grain supply chain to identify problems and potential solutions.

The Canadian Federation of Agriculture, Canadian Wheat Board (CWB) and Western Grain Elevator Association (WGEA) also approve of Ottawa’s plans, but say the proof will be in the pudding.

WGEA executive director Wade Sobkowich said his members are “cautiously optimistic” and pleased the government will implement legislation rather than give the railways until 2013 to voluntarily reach service-level agreements with shippers.

“The effectiveness of the proposed legislation will be determined as service-level agreements are finalized and put into effect so it’s too early to know yet for sure (how well the legislation will work),” he said.

The CWB is also pleased Ottawa will not wait to legislate, said CWB spokeswoman Maureen Fitzhenry.

Canadian National (CN) and Canadian Pacific (CP) issued statements opposing legislation, saying more regulation won’t improve rail service.

Legislation could stifle innovation and Canadian competitiveness, CN said.


(T)hepanelconcludes thatrailwayscontinue tohavemarketpower oversomeoftheir customers…where competitivealternatives arelimitedorlacking altogether(and)… resultsinanimbalance inthecommercial relationshipsbetween therailwaysandother stakeholders.”


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