It may be stretching a point to call an abundant grain harvest an “extraordinary disruption,” the standard needed to justify a federal intervention under the Canada Transportation Act. But when that bumper crop is combined with extreme cold affecting railway tracks, not enough capital investment in the railways, a huge backlog of millions of tonnes of grain waiting to be shipped, empty ships waiting for cargo to arrive by rail, and customers abroad losing faith in Canada’s ability to export, it adds up to an emergency.
So the federal government was right to issue a cabinet order on Friday, even though it reads a bit like something out of a Soviet five-year plan. Ottawa has given Canadian National and Canadian Pacific a planned-economy-style directive on how much grain they must ship, and when, on pain of steep fines.
Earlier last week, Brad Wall, the Premier of Saskatchewan, said that larger grain crops would probably be “the new norm” – and that the extra demand for rail capacity created by the trend to ship oil by rail is probably helping crowd out grain. He called for immediate action from Ottawa, but he also spoke of longer-term solutions, including “modernizing” the regulatory maximums on the railways’ grain revenue, which may be contributing to the companies’ “reallocating cars” to other uses.
Similarly, three years ago, a Conference Board of Canada report suggested that, once a company’s revenue cap is reached – the amounts railroads can charge for moving grain are governed by an exceptionally complicated formula – it may no longer have much incentive to make new investments, or introduce service improvements.
Mr. Wall was also right to discuss prospects of encouraging other railway companies – beyond what he called the duopoly of CN and CP – to come into Western Canada.
The federal government’s order-in-council is a “blunt instrument” (Mr. Wall’s words, and ours too), but it is a necessary short-term stopgap. This year’s bitter cold is likely to recede in a few weeks, but the deficit in Western Canada’s transportation capacity is a long-term problem that has to be dealt with.
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