Back in the winter of 2013-14 when Western Canada’s grain industry was bogged down in a massive rail backlog, the upcoming review of the Canada Transportation Act was viewed as an opportunity to improve the way the rail system moves grain. The review process began in May of 2014 and the final report written by the CTA Review panel was tabled by Transport Minister Marc Garneau in the House of Commons on Thursday.
The over 500-page Emerson Report — the name referring to panel chair David Emerson — contains many recommendations for updating the national transportation system, including several specifically regarding the transport of grain.
The report has drawn a mixed response so far from farm groups — there are potentially positive recommendations, some red flags and in many cases, a lack of detail.
“We still need to go through the report in detail, but our first reaction is that it is short on specific recommendations on how to address the imbalance in railway power,” explains Kevin Auch, chair of the Alberta Wheat Commission.
One notable recommendation is to phase out the maximum revenue entitlement (also known as the “revenue cap) for railways shipping grain over a seven year timeline.
“We believe the elimination of the MRE will impose higher costs on farmers with no evidence it will lead to better service,” says Auch. “This is important for our industry when there are only two major players.”
The Western Canadian Wheat Growers Association, which has called for modernizing the revenue cap and a move toward an incentive-based pricing system, also has concerns about phasing out the MRE.
“The idea that that would end over the next seven years is a bit of a reach. We are not going to be at a place where we don’t have to have some sort of rate regulation after seven years,” says Wheat Growers director Cherilyn Nagel in the interview below.
As part of the federal government’s measures to increase grain movement in 2013-14, interswitching distances (the distance one railway can pull grain off another rail company line) were increased from 30 kilometres to 160 kilometres. That provision is set to expire on August 1, 2016. Both Alberta Wheat and the WCWGA disagree with a recommendation in the report suggesting the extended interswitching limits be allowed to “sunset.”
“We definitely wouldn’t want this to happen. The idea is we want to increase competition, and reducing the interswitching limit would do the opposite,” says Nagel.
Caalen Covey of the Alberta Wheat Commission discusses the Emerson report.
Auch notes the report is also thin on describing reciprocal penalties to hold shippers to agreed-upon levels of service.
“There is very little mention of reciprocal penalties to increase railway accountability, and the recommendation to sunset the increased limit in interswitching to 160 kilometers is very concerning as this will weaken competition between shippers and railways,” he said.
The Agricultural Producers Association of Saskatchewan responded to the report by calling on Ottawa to undertake a costing review of the railways to understand how rail company costs have changed since they were last reviewed in 2001.
“We also need to ensure that the rate producers pay is fair and that it provides a fair return to railways so that they can make necessary investments. A full costing review was an election promise from the Liberal party in the federal election and that’s the best place for the government to start,” said APAS president Norm Hall.
As for positives, both Alberta Wheat and the WCWGA say they’re pleased the report acknowledges the need for improved level of service provisions and a mechanism to reinforce accountability, but both groups also note the language in the report is vague.
“Improving the level of the service is absolutely critical,” says Nagel. “But it’s not very clear how they’re going to do that.”
Several other farm and grain industry groups, including the Canadian Canola Growers Association and the Western Grain Elevator Association, have said they won’t be commenting on the report until they’ve had more time to scrutinize the document.
“With many additional recommendations affecting the entire shipper community, it is imperative that we invest the time to complete a comprehensive analysis of the recommendations,” said the CCGA on Friday.
Wade Sobkowich, representing grain companies in the WGEA, echoed the CCGA: “Given the importance of rail transportation to the grain sector we owe it to ourselves to undertake a full analysis before reaching conclusions.”
Find the entire CTA Review report (volumes 1 & 2) on the Transport Canada website.