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Hunter Harrison, CEO of Canadian Pacific Railway Ltd., gestures during an interview on Sept. 17, 2013, in Toronto. (MOE DOIRON/THE GLOBE AND MAIL)
Hunter Harrison, CEO of Canadian Pacific Railway Ltd., gestures during an interview on Sept. 17, 2013, in Toronto. (MOE DOIRON/THE GLOBE AND MAIL)

CP adds to criticism of Ottawa’s move to ease grain backlog Add to ...

Canadian Pacific Railway Ltd. is joining the country’s other major rail line in criticizing the federal government’s latest move to ease a multibillion dollar grain backlog in the Prairies.

In a statement issued late Thursday evening, CP chief executive officer E. Hunter Harrison said the measures announced by Ottawa a day earlier unnecessarily target the country’s rail sector and will do nothing to ease the backlog.

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Instead, the move “has the potential to cause great damage to the Canadian rail transportation system that is unquestionably the best in the world,” Mr. Harrison said in the written statement. “Targeting the railways when our dedicated men and women are working 24/7 to recover from some of the harshest winter operating conditions ever seen, is not only ineffective but grossly unfair.”

The government didn’t adequately consult the railways before making the “reactionary legislative intervention,” the statement added.

The CP statement follows one from Canadian National that was similarly critical, saying the federal government’s announcement was a “sad day for Canada” that will leave the rail giants at risk of losing business to American competitors.

Prairie farmers are facing a backlog of grain after a record, bumper crop in 2013 and an unusually cold winter that reduced the railways’ ability to transport the product, which accounts for roughly 20 per cent of rail loads in Canada. The federal government estimates as much as $20-billion in grain is sitting in storage, unable to get to port. Farmers who have been able to sell their product are often getting reduced rates and facing the prospect of some of their remaining grain spoiling in the spring weather.

The changes announced Wednesday by Transport Minister Lisa Raitt and Agriculture Minister Gerry Ritz include expanding “interswitching” in the Prairies. Under the former rules, grain elevators could only ship with a railway that’s withing 30 kilometres of the elevator – for the vast majority, that left them with only one choice.

Wednesday’s changes expand that area to 160 kilometres, meaning far more grain shippers across the Prairies will be able to choose between CN and CP – or, if they live close enough to the border, an American line. Under the deals, however, the closest railway must still ship the product the short-haul distance, up to 160 kilometres, to the railway that has signed the contract, because railways still can’t use a competitor’s line. That means farmers are still ultimately relying on CN and CP to get the grain moving in the first place. Since both are facing backlogs, an analyst said this week the move won’t have much impact.

Railways don’t see it that way. In its statement Thursday, CP said “the expansion of regulated interswitching could seriously impact Canada’s competitiveness” by opening the market to U.S. railroads and ports.

“Interswitching will also lead to double handling of grain shipments which will slow down the grain supply chain, negatively impacting transit times,” the railway said. CP is arguing, in other words, that if railways are forced to do a series of short hauls for other railways it will prove more complicated than if they all handled long hauls from their own turf.

“Canada’s grain-handling system is just not built to handle this record amount of grain,” Mr. Harrison said in the statement, which stressed the railway continues to move “record” amounts of grain. “While it is easy to blame the railways for ‘dropping the ball,’ it ignores the facts.”

Earlier this month, the federal government set minimum shipping levels for CN and CP in a bid to get more grain moving. Ms. Raitt said Wednesday she’s confident the railways will be able to meet that target. The changes Wednesday also, in effect, allow the government to set new targets each year going forward.

Mr. Ritz said the interswitching change was meant to encourage a quasi-competitive environment in Canada’s federal rail duopoly. Mr. Ritz has for weeks pointed a finger at the railways, while the opposition argues it was Ottawa that didn’t move fast enough.

Manitoba and Alberta supported the federal measures announced this week, while the Saskatchewan government said they did not go far enough.

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