It’s a battle that took more than a decade to wage — but producers should see the benefits of the new grain transportation law this fall, says a pair of Alberta farm leaders.
“I expect we’ll see advantages right away,” said Alberta Wheat chair Kevin Bender. “When the previous government brought in previous legislation after the 13/14 season, it was kind of an emergency legislation it brought in. We saw the benefits of that right away.
“When it expired on July 31 of last year, that’s when problems set in again for the winter. We saw it both ways. We saw it improve when they brought the legislation in and we saw it deteriorate when the legislation expired.”
One of the immediate changes should be that delivery contracts are honoured, added Bender’s counterpart at Alberta Barley.
“When we do sign those contracts, we expect to deliver them on the delivery period of those contracts,” said Jason Lenz. “That hasn’t been happening and as farmers, we feel we’re accountable in getting the grain to the grain terminals on time. We expect the railway to get that grain to our export customers on time.”
The transportation modernization act (Bill C-49) is “historic,” transport minister Marc Garneau and agriculture minister Lawrence MacAulay said at a news conference following the bill’s passage late last month.
“I am confident this legislation will deliver better service, better grain movement, and a stronger economy,” said MacAulay.
The Act is intended to make railways accountable when their service is poor and also changes the maximum revenue entitlement (MRE), which regulates the amount of money railways can earn shipping Western grain. It will now account for each railway’s investment in grain shipping on an individual basis, a change that prompted cN rail to announce it will buy 1,000 new hopper cars.
The omnibus legislation, introduced a year ago, includes many changes to the Canada Transportation Act beyond grain. It was batted back and forth between the Commons and Senate, raising concerns it might not be passed before Parliament’s summer break and fears this year’s massive shipping backlog, the second in five years, might repeat in the 2018-19 crop year.
But as pleased as shippers and farmers are, no one is raising a ‘mission accomplished’ banner.
Railways must now reach level-of-service agreements with grain companies and face financial penalties for poor service. Industry watchers expect that will prompt the railways to be conservative with their service commitments. (However, if railways and grain companies can’t reach an agreement a third-party arbitrator will broker a deal.)
It could take six months or longer to see how effective service level agreements are, said Wade Sobkowich, executive director of the Western Grain elevator association.
But the hope is that grain companies will get the rail cars they need when prices are best.
“This will result in better returns for farmers, a stronger supply chain, and more opportunity for all Canadians employed in getting grain from the Prairies to our markets,” said Sobkowich, adding a more efficient rail system will re-establish Canada’s reputation as a reliable supplier.
Along with service agreements, the new law also gives grain companies access to competing railways through long-haul interswitching.
Those are powerful tools, said Lenz.
“They will both bring about things we’ve been asking for,” said the Bentley-area farmer. “The reciprocal penalties will bring a level of accountability throughout the system. It will make the railways accountable, which hasn’t necessarily been the case.
“As far as the long-haul interswitching, that will give us competition for hauling our grain.”
Both are “steps in the right direction” to improving grain transport, he said.
“That’s as good as we can ask for now,” said Lenz. “Grower associations and the industry as a whole have been asking for a more on-time delivery system from our railways.”
The new law also gives the Canadian transportation agency the right to monitor grain shipping, and with the permission of the transport minister, investigate suspected problems. Before, the agency could only act when a grain company launched a formal complaint against a railway — a costly and time consuming process that shippers were sometimes reluctant to use out of fear that challenging the railways would result in even worse service.
Measuring whether the act is working will be easy, said Greg Cherewyk, Pulse Canada’s chief operating officer.
“It’s achieving greater and greater capacity and improved service,” he said. “I’ll be happier when I start to see that play out week to week when I start to see my members getting the level of service they expect to get. That’s when I’ll start celebrating.”
Bender said he’ll also be watching closely to see how the long-sought-after changes work at the elevator level.
“We’re hoping that these reciprocal penalties and interswitching are enough for guys to move their grain in a timely manner,” he said.
The “building blocks” for better service are now in place, said Jean-Marc Ruest, a senior official with Richardson International, which played host to MacAulay and Garneau’s news conference at one of its elevators.
But the key will be changing the relationship between shippers and railways from an adversarial one to a co-operative one.
“A large part of it depends on the goodwill of the parties to work together,” said Ruest. “I think we’ll have to expect and rely on the parties to treat one another fairly.”
One of the things ruest said he’ll be watching is long-haul interswitching and whether CN and CP — long used to operating as a duopoly — make use of it when one is performing poorly and the other has trains available to move more grain.
“It’ll be interesting to see whether the railways do want to compete against one another and are seeking that extra business,” Ruest said.
But another attendee at the news conference who had taken time off from seeding to witness the occasion said “the passage of Bill C-49 is great news for the future of our industry.”
“For far too long the grain industry has been at the mercy of the railways with no way to hold them accountable for poor rail service,” said Art Enns, vice-president of the Grain Growers of Canada.