Farm­ers fear fall­out of crude-by-rail plan

Calgary Herald - - FRONT PAGE - AMANDA STEPHEN­SON

Still smart­ing from last year’s grain back­log, Al­berta farm groups say Premier Rachel Not­ley’s sug­ges­tion that the fed­eral gov­ern­ment in­vest in crude-by-rail ca­pac­ity could make it even harder to get their crops to mar­ket.

Not­ley said Mon­day her pro­posal that the Trudeau gov­ern­ment in­vest in rail cars and lo­co­mo­tives to al­low for the ship­ment of more crude is an ef­fort to tackle the widen­ing price dif­fer­en­tial Al­berta re­ceives for its oil, and is not in­tended to in­ter­fere with the move­ment of grain on the rails.

But Prairie farm­ers — who have lost bil­lions of dol­lars in sales in the past five years due to two sep­a­rate rail ship­ment log­jams that left crops stranded in bins and el­e­va­tors — are con­cerned their in­dus­try could be col­lat­eral dam­age.

“In­ad­ver­tently, it will (hurt us),” said Lynn Ja­cob­son, pres­i­dent of the Al­berta Fed­er­a­tion of Agri­cul­ture.

“If you’re go­ing to ship more of one com­mod­ity, then you’re go­ing

to have to ship less of an­other.

The rail­ways are op­er­at­ing close to ca­pac­ity now — when they have to start pri­or­i­tiz­ing, in a lot of cases, that hurts grain ship­ments.”

Farm­ers were fu­ri­ous last spring when higher-than-ex­pected crop vol­umes (com­bined with cold weather that forced the rail­ways to run shorter trains) cre­ated a grain ship­ping back­log.

The de­lays in get­ting prod­uct to mar­ket caused cash flow is­sues for pro­duc­ers and dam­aged Canada’s rep­u­ta­tion as a re­li­able ex­porter, farm groups say.

An even larger rail tran­spor­ta­tion cri­sis took place in 2013-14, when the com­bi­na­tion of a record har­vest and a bru­tally cold win­ter slowed grain de­liv­er­ies and cost farm­ers up­wards of $5 bil­lion in lost sales.

While the grain tran­spor­ta­tion sys­tem ap­pears to be run­ning smoothly so far this year, a de­layed har­vest as well as a sig­nif­i­cant carry-over from last year’s crop means there will likely be some heavy ship­ping months this win­ter.

Ward Toma, gen­eral man­ager of the Al­berta Canola Pro­duc­ers Com­mis­sion, said many farm­ers be­lieve the fed­er­ally im­posed rev­enue cap on grain ship­ments re­sults in rail­way com­pa­nies pri­or­i­tiz­ing other com­modi­ties.

“The rail­ways want to haul stuff that pays a big­ger mar­gin,” Toma said. “Grain is a reg­u­lated prod­uct for them, so there’s not much in­cen­tive for them to move it. There’s more in­cen­tive for them to move an un­reg­u­lated prod­uct like oil.”

He added that more crude cars — with­out in­vest­ments in the crews to staff them, as well as the in­fra­struc­ture of the tracks them­selves — will only in­crease con­ges­tion on the rails.

“I can’t see it not clog­ging up the sys­tem,” Toma said.

Last May, the fed­eral gov­ern­ment passed the Tran­spor­ta­tion Mod­ern­iza­tion Act, aimed at help­ing farm­ers get their crops to mar­ket. The leg­is­la­tion es­tab­lishes re­cip­ro­cal penal­ties for un­met com­mit­ments be­tween rail­ways and their cus­tomers, and also per­mits the Cana­dian Tran­spor­ta­tion Agency to launch for­mal in­ves­ti­ga­tions into sup­ply chain is­sues.

Cana­dian Pa­cific Rail­way Ltd. and Cana­dian Na­tional Rail­way Co. have each pledged to meet the needs of the coun­try ’s agri­cul­tural pro­duc­ers this year. In June, Cal­gary-based CP an­nounced plans to in­vest more than a half-bil­lion dol­lars in new, high-ca­pac­ity grain hop­per cars. In ad­di­tion, CP “has added peo­ple and lo­co­mo­tives and in­vested record amounts in cap­i­tal to meet the needs of its cus­tomers, across all lines of busi­ness, and the broader econ­omy,” spokes­woman Salem Woodrow said in an email.

Mon­treal-based CN — which is­sued a for­mal apol­ogy in March as a re­sult of the 2017-18 grain back­log — has ac­quired 1,000 new, high-ca­pac­ity hop­per cars, and has plans to ac­quire 200 new lo­co­mo­tives over the next three years. The com­pany says grain move­ments on CN in Septem­ber were the sec­ond­high­est on record, in spite of the de­layed har­vest.

It’s clear the rail­ways are mo­ti­vated, said Mark Hemmes of Quo­rum Corp., the fed­eral gov­ern­ment-ap­pointed mon­i­tor for the Prairie grain han­dling and tran­spor­ta­tion sys­tem. But they are also un­der pres­sure from all sides, he said.

“The vol­umes are in­creas­ing in oil, but they’re also in­creas­ing in potash, they’re in­creas­ing in coal, the con­tainer traf­fic con­tin­ues to grow,” Hemmes said.

Crude-by-rail ex­ports hit an all­time high of 206,000 bar­rels per day (bpd) in July, up 73 per cent from a year ear­lier. The oil in­dus­try ex­pects that num­ber will reach 300,000 bpd by the end of the year.

While farm­ers some­times blame an in­crease in crude by rail for their per­sonal tran­spor­ta­tion woes, Hemmes said the ma­jor­ity of oil be­ing shipped out of Al­berta is headed for re­finer­ies in the Mid­west and the U.S. Gulf Coast — which is not where the ma­jor­ity of grain flow­ing out of Al­berta is headed.

“We do send a sig­nif­i­cant amount of grain from Western Canada into the United States, but 75 to 80 per cent of it is go­ing ei­ther to Thun­der Bay, (Ont.), Van­cou­ver or Prince Rupert (B.C.),” Hemmes said.

How­ever, Hemmes added if ef­forts to get Al­berta crude to the west coast be­come in­creas­ingly re­liant on rail, farm­ers will be right to worry about con­ges­tion on the line.

“If they start sell­ing (more oil) to the west coast, it will have a sig­nif­i­cant im­pact,” Hemmes said.

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