Inside Logistics

Railways slam fed plans to level rail playing field

Rail Freight Service Review prompts complaints from rails


CN crews are working to contain a jet fuel spill after one of its trains derailed in Southwestern Ontario

March 21, 2011
by MM&D staff

TORONTO: Canada’s two major railways stand together in opposition to what they call government plans for increased regulation to address shippers’ concerns over rail freight service.

CN and CP were reacting to Friday’s announcement of the federal government’s plan to deal with recently completed Rail Freight Service Review. Plans include legislation to establish shippers’ rights to service agreements with railways, a streamlined commercial dispute resolution mechanism and a commitment to develop performance metrics against which service will be evaluated.

According to CN president and CEO Claude Mongeau, the “panel’s recommendations are drifting backward toward more regulation instead of encouraging the current momentum for positive change. The Canada Transportation Act (CTA) already provides extensive safeguards to protect shippers’ interests, and we believe a regulatory approach runs the risk of stifling innovation and thwarting the progress that has been achieved in the last two years.”

Mongeau added the panel failed to recognize the improvements to service that have taken place over the past two years, and said the panel had focused solely on the railways, missing the fact that all participants in the supply chain are accountable for transportation system performance, not just railways.

Fred Green, president and CEO of Canadian Pacific, said that additional regulation for relationships outside of commercial agreements is completely unwarranted. “I am concerned about the application of some of the recommendations involving regulation. The devil will be in the details.”

While the railways were clearly unhappy with the prospect of stricter regulations, industrial shipper groups are pleased with the announcement.

Bob Ballantyne, president of the Canadian Industrial Transportation Association (CITA) said the government’s plans will “provide a framework that will help re-balance the market power between the buyers and sellers in the rail freight market and lead to improved commercial relations. Shippers commend the government for announcing this action that will benefit Canadian industry, railways, and the broader Canadian economy.”

The Forest Products Association of Canada (FPAC) applauds the government’s action. “The government has correctly recognized that there are imbalances in Canada’s rail system that negatively impact the livelihoods of rural resource communities,” said Avrim Lazar, president and CEO of FPAC. “From our perspective, the result will be more reliable and efficient rail service.  The measures announced today will help to ensure our rural industries can compete, create jobs, and sustain hundreds of communities from coast to coast.”

Likewise, the Chemistry Industry Association of Canada (CIAC) said the recommendations will “establish greater communication and collaboration between Canada’s railways and their customers”. CIAC believes that service contracts are the best approach to achieve efficient rail systems and competitive manufacturing in Canada.

The federal plans include helping shippers and the rail industry to negotiate a template rail service agreement.  The plans to begin a consultation on the template were part of a comprehensive package from the federal government in response to the Rail Freight Service Review which was completed last fall.

The review was launched in 2008 to address ongoing issues with rail freight service, raised by users of the rail supply chain. Among other issues, shippers have long been concerned about an effective monopoly in rail service to remote locations.

The Rail Freight Service Review was conducted in two phases. The first phase comprised analytical work to achieve a better understanding of the nature and extent of problems and best practices within the supply chain, including those experienced by shippers, terminal operators, ports and vessel operators, with a focus on railway performance. An independent panel, chaired by Walter Paszkowski, led the second phase, which included extensive consultations with stakeholders across the supply chain. The panel’s final report was also made public today.

The government accepts the panel’s commercial approach and intends to implement the following steps to improve the performance of the entire rail supply chain:

  • initiate a six-month facilitation process with shippers, railways and other stakeholders to negotiate a template service agreement and streamlined commercial dispute resolution process;
  • Table a bill to give shippers the right to a service agreement to support the commercial measures;
  • establish a Commodity Supply Chain Table, involving supply chain partners that ship commodities by rail, to address logistical concerns and develop performance metrics to improve competitiveness;
  • in collaboration with Agriculture and Agri-Food Canada, Transport Canada will lead an in-depth analysis of the grain supply chain to focus on issues that affect that sector and help identify potential solutions.

A complete copy of the government response to the review is available at http://www.tc.gc.ca/eng/policy/acg-rfs-review-examen-sfm-rvw-eng-442.htm.