Alberta farm groups welcomed the federal government’s weekend decision to extend minimum grain hauling mandates, but cautioned more still needs to be done if producers are to have long-term confidence in Canada’s grain transportation system.
With just hours remaining before the expiration of a government order put in place last March, Transport Minister Lisa Raitt and Agriculture Minister Gerry Ritz announced Saturday that minimum grain volume requirements will be extended until March 28, 2015. Under the new order, Canadian Pacific Railway and Canadian National Railway will be required to move specified amounts of grain — ranging from 200,000 metric tonnes per week to 465,000 metric tonnes per week — all winter long.
The volume targets are smaller than the 500,000 metric tonnes per week the railways were required to haul under the last government order, put in place after Canada’s railways struggled last year to transport a record-breaking crop in the midst of one of the harshest winters on record. This year’s harvest is smaller than 2013’s.
Farmers have alleged grain shipments are being rejected by the railways in favour of crude oil.
The new rules carry the threat of a $100,000 per week penalty for non-compliance, and the railways will also be required to submit detailed winter contingency plans to the government.
CN spokesperson Mark Hallman said in a statement that the regulations should have been lifted, since CN has been meeting demand since the new crop year began on Aug. 1 and continues to set a record-setting pace.
“More regulation threatens to increase costs, stifle innovation and potentially discourage investments that are critical to building the strong, safe and resilient supply chains of the future,” Hallman said in an e-mail.
Canadian Pacific also questioned the need for extended government intervention, issuing a statement saying it is working with all its commodity customers to improve efficiency and increase capacity.
“More than anything, it is market forces that have driven the record volumes of grain that CP has delivered this year and last,” the statement read.
But Lynn Jacobson, president of the Alberta Federation of Agriculture, said his organization had been pushing for the government to renew the regulations. He estimates last year’s transportation backlog cost Prairie farmers an estimated $7 billion to $8 billion, as crops that could have been sold at premium prices sat in bins and elevators instead.
He said there’s no reason to think a similar situation couldn’t happen again, especially in the event of another harsh winter.
“We’ve been pushing for this, because it’s about the only lever we can bring against the railways,” Jacobson said. “If they took all the penalties off and transportation went sideways again like it did last year, that wouldn’t look too good for the government.”
Jacobson cautioned the minimum volume regulations are only a short-term solution. The federal government is currently conducting a review of Canada’s Transportation Act, and many farm groups believe legislative changes are needed to ensure the rail system can meet the needs of the agricultural sector for decades to come.
“The railways have never been compelled to do anything they didn’t want to do. They’ve basically been allowed to do whatever they want,” he said. “And that’s good for them and their shareholders, but it sure doesn’t mean much for the rest of Western Canada.”
Many farm groups, including the Alberta Wheat Commission and the Grain Growers of Canada, have called for a mechanism that would allow for reciprocal penalties to be part of any service agreement signed between a railway and a grain company.
Jacobson said he also wants to see more transparency in the system, so that farmers know how many cars are available and what a railway’s capacity is in any given week.
In a statement announcing the government’s decision, Ritz called on all parties in the supply chain to work together to ensure the efficient movement of grain to markets this winter.
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