CALGARY—Canada’s two biggest railways have voiced their collective disappointment in federal legislation tabled in Ottawa that could see customers poached by competitors from the United States.
Canadian Pacific Railway Ltd. (CP) joined rival Canadian National Railway Co. (CN) in opposition of the proposed legislation, expressing “extreme disappointment” in the Conservatives’ attempt to boost the movement of grain by rail.
According to a statement released by the railway, it believes the legislation “will do nothing” to boost capacity on Canada’s rail lines.
“(It) will not move more grain to markets more quickly, and has the potential to cause great damage to the Canadian rail transportation system that is unquestionably the best in the world,” CP chief executive E. Hunter Harrison said about the legislation in the statement.
The legislation tabled this week would amend both the Canada Grain Act and the Canada Transportation Act in an attempt to move a huge backlog of grain that has been stuck in storage across the Prairies.
Drawing the ire of both CN and CP is the proposed extension of inter-switching limits from 30 kilometres to 160 kilometres across Alberta, Saskatchewan and Manitoba.
CP said it fears increasing the limit “could seriously impact Canada’s competitiveness” by allowing for the transfer of rail traffic normally handled by Canadian firms to railways in the U.S.
The rail firm said the move could cut into Canadian jobs and investment.
Montreal-based CN shared similar sentiments this week, claiming the move could open Canadian railways to “unfair poaching” by U.S. firms.
“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 president and chief executive Claude Mongeau said in a statement released by his railway.
CP pointed to the record 2013 crop—Canadian producers harvested a record 76 million tonnes of grain last year—as the root cause of the backlog, and said “challenges with moving this exceptional crop need to be recognized.”
According to CP, the crop yield last year was 27 per cent above the previous record set in 2008-09, and 37 per cent above the five-year average.
And with the majority of the crop earmarked for export, the railway said there is now about 55 million tonnes of grain that needs to be moved by rail—more than 20 million tonnes more than what is exported in a typical year.
Rail also only makes up one piece of the supply chain puzzle, CP noted, and said its important not to ignore farm storage, elevator capacity, terminal capacity and overall port capacity.
“Canada’s grain handling system is just not built to handle this record amount of grain,” said Harrison. “While it is easy to blame the railways for ‘dropping the ball,’ it ignores the facts.”
The railway also said weather has wreaked havoc on the supply chain this winter, and fears the proposed legislation is largely reactionary.
“We need to move away from reactionary legislative interventions that target unfairly one participant and potentially damage the Canadian economy,” Harrison said.
“Instead we should all focus on commercial solutions to maximize overall capacity in the grain supply chain.”