Canadian National Railway Co. says the federal government’s extension of an order requiring the country’s major railways move a minimum amount of grain in the coming harvest is a “burdensome and ill-advised regulatory intervention.”
Ottawa said on Friday CN and Canadian Pacific Railway Ltd. face daily fines of $100,000 if they don’t each haul 536,250 tonnes of wheat, canola and other crops each week from Aug. 3 to Nov. 29.
The regulations are part of a slate of rules aimed at preventing a repeat of last year’s backlog of grain, which came after a record harvest and winter that snarled rail traffic.
Farmers and the companies that buy and sell grain complained the rail companies were offering poor service that cost them key contacts. Railways said the massive crop was unforeseen, and the harsh winter required them to run shorter, slower trains for safety reasons. Both railways say Canada needs better supply chain co-ordination, not new laws.
CN chief executive officer Claude Mongeau said in a press release Friday the grain transportation system is running smoothly and equipped to handle the coming harvest, and Ottawa’s move is “unfortunate. The government’s approach can only stifle supply chain collaboration and may ultimately undermine investment in the rail sector,” he said.
Montreal-based CN said its western grain shipments for the past year were 25-per-cent higher than average, despite the extreme cold that reduced winter volumes to 2 per cent less than normal.
CP said in a statement the Calgary-based company has exceeded the minimum targets the government first imposed in the spring, and will continue to move “record volumes of grain.”
“Today’s disappointing announcement by the government of Canada is very unfortunate and clearly demonstrates that, despite the facts, this government has not listened,” said Hunter Harrison, CEO of CP. “Issues relating to the transportation of grain will not be solved in Ottawa but by the joint collaboration of all partners in the supply chain.”
The trade group that represents Cargill, Viterra and other major grain companies welcomed the news. “We think it’s numbers we can work with,” said Wade Sobkowich, executive director of the Western Canadian Grain Elevator Association. “The key for us is knowing what’s going to move and making numbers we can plan for and sell to. Certainty of car supply is paramount.”
Mr. Sobkowich said in an interview the minimum weekly shipments are an amount the railways had promised – but failed – to move last fall, even before the winter hit.
He expressed concern that railways would hit the minimum targets by choosing routes that are the fastest, rather than those desired by the buyers of the grain.
“A lot still needs to be determined on terms of how this plays out,” Mr. Sobkowich said from Winnipeg.
Last year’s western harvest of 76,000 million tonnes was 50 per cent bigger than usual, thanks to the right weather and improved growing techniques. But what should have been good news for the country’s grain industry left led to stuffed storage bins, cancelled contracts and cash flow problems.
This year’s harvest is expected to be smaller, about 59 million tonnes, but there are still 18 million tonnes stored on farms and in elevators, Agriculture Canada says.
The measures are part of a package of regulations announced by the ministers of transport and agriculture, including: requiring the railways to submit data on grain movements, stricter service agreements with grain shippers, the geographic extension of so-called interswitching rights, which give producers of all commodities in Western Canada the right to choose a competing railway.
Some of the regulations were imposed temporarily in the spring, while others were part of amendments made to the Canada Transportation Act and Canada Grain Act.