Ottawa tables legislation aimed at clearing grain transportation backlog

OTTAWA – The federal government has tabled legislation aimed at increasing the movement of grain that has been left sitting in bins across the Prairies because of a railway transportation bottleneck.

“Our reputation as a trading nation is at stake,” federal Transport Minister Lisa Raitt said Wednesday.

“And (Agriculture) Minister (Gerry) Ritz has let us know about the many contracts that we’ve had difficulties filling as a result of the grain not moving off the Prairies.”

The legislation introduced Wednesday would amend the Canada Grain Act and the Canada Transportation Act.

Among other things, the changes would allow the Canadian Grain Commission to regulate how much a grain company will pay to a farmer if the company doesn’t meet delivery dates set out in a contract.

It also aims to extend what are called inter-switching limits from 30 kilometres to 160 kilometres in Alberta, Manitoba and Saskatchewan. Most grain elevators on the Prairies are only served by one railway and the federal government says expanding inter-switching would allow more service by more rail companies.

“This reflects the new reality of far apart elevators are and the changes in the rail system,” Ritz said in a conference call Wednesday.

“This inter-switching is the best way to give us a quasi-competitive situation.”

Western Canadian farmers harvested a record crop of 76 million tonnes last year — 50 per cent higher than average. But the crop is not moving.

Canadian National (TSX:CNR) and Canadian Pacific (TSX:CP) have blamed the backlog on the size of the harvest and extremely cold weather. They have said they had to use shorter trains during freezing temperatures to ensure brakes can be used properly and that meant less capacity. CN also said grain elevator companies acted too slowly at the beginning of last year’s harvest to get products to market.

Ottawa stepped in earlier this month and ordered rail companies to double the amount of grain they move each week, up to a minimum of one million tonnes in 11,000 cars each week. If they don’t meet the requirement, they could face fines of up to $100,000 a day.

The Saskatchewan government says the legislation “is deficient,” while one railway says it’s a “heavy-handed regulatory intrusion.”

“CN is disturbed that the government has decided to punish railways with re-regulation for an outsized crop and winter conditions totally beyond their control,” Canadian National president and CEO Claude Mongeau said in a statement Wednesday.

“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.”

Mongeau also claims the inter-switching change could hit Canada’s railways by opening their business to “unfair poaching by U.S. railways.”

Saskatchewan is disappointed that the legislation does not increase the $100,000 penalty, direct fines to benefit farmers instead of federal coffers or boost volume numbers.

Saskatchewan Agriculture Minister Lyle Stewart says “at first blush … the legislation itself is deficient.”

“We made some substantial asks and they weren’t numbers that we pulled out of the air,” Stewart said in Regina.

“They were numbers that we got from industry and we knew that they were achievable. We believe that 13,000 cars a week of grain could be unloaded, for instance, without handicapping other commodities that need to flow from Western Canada and we thought that $250,000 a day penalties were not out of line for non-compliance.”

Liberal MP Ralph Goodale claims there is nothing in the legislation that will immediately help farmers.

“A fine or penalty paid by the railway to the government doesn’t do the farmer a darn bit of good. The farmer’s still out of pocket all of the losses he’s incurred because he can’t deliver his grain,” said Goodale, who represent a Regina riding.

However, Manitoba and Alberta both like that the legislation includes an extension of inter-switching distances.

“The Manitoba government supports this move as it means trains will be able to travel longer distances along other rail companies’ tracks and will improve Manitoba’s access to the port in Churchill as well as important U.S. markets,” said Manitoba Agriculture Minister Ron Kostyshyn.

NDP Leader Thomas Mulcair says Canada’s reputation is being damaged by its continued inability to get last year’s bumper crop to market.

Countries like Japan are going to start looking to the United States since Canada doesn’t seem to be able to get its grain to port, he said after meeting with Manitoba cabinet ministers in Winnipeg.

“It’s not just a one-off because of a high-production yield last summer,” Mulcair said Wednesday.

“It’s a problem long-term that the Conservatives have created through their incompetence and indolence in dealing with this crisis.”

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

— By Jennifer Graham in Regina and files from Chinta Puxley in Winnipeg