Canadian Manufacturing

CN ‘disturbed’ by legislation aimed at clearing grain backlog

President Claude Mongeau said proposed legislation "will do little to move more grain, now or in the future"



MONTREAL—Canadian National Railway Co. (CN) said it is “disturbed” by government meddling in the shipping industry after Ottawa tabled legislation to aimed at increasing the movement of grain by rail.

Introduced this week, the legislation would amend the Canada Grain Act and the Canada Transportation Act to force railways to move the backlog of crop that has been left sitting in bins across the Prairies because of a rail bottleneck.

“The legislation does not address the root cause of the current grain situation and will do little to move more grain, now or in the future,” CN president and chief executive Claude Mongeau said in a statement released by the railway.

Under the proposed legislation, Ottawa wants to extend inter-switching limits from 30 kilometres to 160 kilometres across the Prairie provinces.

Most grain elevators in Alberta, Saskatchewan and Manitoba are only served by one railway.

The legislation would also allow the Canadian Grain Commission (CGC) to regulate how much a grain company will pay farmers if delivery dates set out in contract are not met.

Mongeau said his company is particularly troubled by the proposed changes to inter-switching limits, and said the government is pitching the increase “without any due process to assess the potential consequences for railways” and the national economy.

Under current rules, shippers are allowed to transfer traffic to another rail firm at a rate set by the Canadian Transportation Agency (CTA) as long as the shipper’s facility is within 30 kilometres of where the two railways connect.

The new legislation would see that number increased more than five fold.

“This action could hit Canada’s railways by opening their business to unfair poaching by U.S. railways without any reciprocity,” Mongeau said. “Beyond causing financial harm to CN, it could drain traffic away from Canadian ports and cause the loss of jobs, reduce investment and undermine tax revenues across Canada.”

CN and rival Canadian Pacific Railway Ltd. (CP) have both been at odds with Ottawa over the issue, with the feds earlier this month ordering rail companies to double the amount of grain they move each week, up to a minimum of 11,000 cars.

They could face fines of as much as $100,000 a day if they miss the mark.

Both firms have blamed the backlog on the size of last year’s harvest and the extremely cold weather that has plagued the country this year.

The federal government estimates the backlog has cost farmers up to $8.3-billion in lost sales.

Western Canadian farmers harvested a record 76 million tonnes of grain in 2013, 50 per cent higher than average.

Mongeau said he would like to see the new legislation include more regulatory oversight of grain elevators in Canada to make sure resources are allocated properly when crops are larger than normal.

—With files from The Canadian Press

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