Grain shippers urge MPs to move ahead with extended interswitching

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A group of 13 commodity and farm organizations representing grain shippers are calling on the federal government to move ahead with a commitment to bring back extended interswitching in the Canadian rail system.

The 2023 federal budget included a promise to implement an 18-month pilot trial for extended interswitching.

Interswitching allows a shipper that’s served by one railway to seek service from another railway company via an interchange between the two lines, up to a certain distance.

Currently shippers can access interswitching service at distances of up to 30km, which is used to smooth rail traffic flows in and around cities. The pilot program proposed in the budget would extend that distance to 160km — the same measure that was temporarily put in place for three years following the grain backlog in Western Canada in 2013-14.

“Bringing it back, conceptually, is really excellent,” says Greg Northey, vice-president of corporate affairs for Pulse Canada, noting the government sees the measure as a way to increase competition.

While railways are actively lobbying against extended interswitching, saying it will reduce efficiency in the rail system, the group of commodity and farmer organizations representing grain shippers have launched a campaign that they’re calling “Flip the Switch.” They’re asking MPs to move ahead with the interswitching provision in the budget bill, and are also advocating for a series of recommendations that go beyond the federal budget commitment.

Rather than an 18-month trial, the group is asking the federal government to implement the proposed pilot program for a minimum of five years.

That’s because grain shippers may be reluctant to exercise their right to interswitching service if it’s only in effect for short time and potentially jeopardizes their relationship with their current railway service provider, says Northey. In some cases, grain companies may also have existing contracts that extend well into that 18 month timeframe.

“Our proposal at the moment is to extend it for five years. That gives a really good runway for collecting data and really seeing what it does for the competitive dynamic,” he says. “And it gives I think, enough time period where you’ll have shippers who are comfortable accessing the competitive market for potentially the first time.”

Listen to Greg Northey of Pulse Canada discuss the federal government’s extended interswitching proposal (article continues below):

In addition to the request for five years rather than 18 months, the group is also recommending Ottawa increase the extended interswitching distance to 500km rather than 160km, as that distance would likely cover all grain elevators in Western Canada.

“Our view is simply that if you’re going to run a pilot, out of fairness you should have it extended to all shippers so that they can utilize it. To get into say the Peace River region or Carrot River, certain areas where 160 isn’t far enough, we’re proposing that the distance be expanded to to ensure that shippers in those areas have access to do a potential interchange,” says Northey.

Railways are already obligated to ensure interchanges where their lines meet are functional for interswitching, but Northey says not every interchange can handle a long unit train, creating a practical barrier to interswitching service for grain. This will require investment in upgrades to interchange infrastructure, he notes.

Bill C-47 — the budget implementation bill that includes the provision around extended interswitching — is currently at the second reading stage in the House of Commons.

The 13 groups behind the “Flip the Switch” campaign include the following: Pulse Canada, Canadian Pulse and Special Crops Association, Cereals Canada, Canola Council of Canada, Canadian Canola Growers Association, Canadian Oilseed Processors Association, Soy Canada, Sask Wheat, Grain Growers of Canada, Alberta Wheat, Alberta Barley, Alberta Pulse, and the Western Grain Elevator Association.

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