‘Captive’ customers want transparency from Canada’s railroads.
CARRIERS KNOCKING ECONOMY OFF THE RAILS
Teck Resources Ltd. told a federal committee last week that “rail service failures” have been costing the company between $ 50 million and $ 200 million over 18- month periods during the past decade. The Vancouver-based metals and mining giant is Canadian Pacific Railway Ltd.’s largest rail customer, and one of Canada’s biggest rail users.
“Perennial rail service challenges have impacted our competitiveness, our national supply chain’s long-term economic sustainability and Canada’s global reputation as a trading nation,” Teck wrote in its briefing to the committee reviewing Bill C- 49, the government’s modernization of the Transportation Act.
The sentiment was echoed by other mining, agriculture and forestry companies, at committee meetings in Ottawa this week. Shippers contend that Canadian rail carriers should be forced to publicize certain internal shipping data, a legislative change they say would vastly improve the bargaining power of captive shippers in remote areas.
So- called “captive” shippers, who rely solely on a single carrier to move their product, have long complained they’re at the mercy of Canada’s two main carriers, CP and rival Canadian National Railway Co.
Shippers accuse carriers of favouring their more well- serviced markets when rail cars are in short supply, causing shipping delays for companies that have no other transportation options like trucks or other rail carriers. The delays leave them with few options to dispute carrier rates or prevent backlogs in product shipments, they say.
“We think that data, more than anything else, is the most import- ant remedy,” said Pierre Gratton, the president and CEO of the Mining Association of Canada.
Companies shipping l umber, grain, minerals and a host of other products from rural, remote regions often suffer from an “imbalance of power,” according to a briefing from the Forest Products Association of Canada.
Business associations have been generally supportive of the policy changes under Bill C- 49, saying it goes much further than earlier amendments proposed in recent years. But they say data sharing needs to be expanded before it will be useful to captive customers.
“Policy- makers, regulators and users of the rail transportation system need sufficiently detailed data on a timely basis in order to make evidence based decisions,” the western Canadian Shippers’ Coalition said in its briefing.
The amendments to Bill C- 49 that would effectively make Canadian carriers report the same information as U. S. operators. Currently, U. S. carriers are compelled to disclose weekly reports about the movement of their rail cars, including which of the 23 commodity groups each rail car is delivering.
Bill C-49, by comparison, will compel CN and CP to disclose aggregated reports about the movement of rail cars, but not the specific commodity of each rail car. The reports would instead be categorized more generally, which shippers argue won’t provide much insight into carriers’ operations.
U. S. carriers are also occasionally compelled to share the information contained in “waybills,” which includes data about the rate, origin, destination and physical route of individual shipments. Under the current policy, Canadian carriers won’t have to disclose waybill information.
“It’s not granular enough to be useful to a shipper,” said François Tougas, a partner at McMillan LLP law firm in Vancouver who represents Canadian shippers.
Rail companies counter that further access data only threatens to distort the picture as to the cause of shipper delays and other members of the supply chain are not compelled to report similar operational data.
“Railway data alone, and without proper context, can lead to false conclusions about the root cause of an issue,” CP spokesperson Jeremy Berry said in an email.
CN said data sharing should apply to all market participants equally and it has already increased its data sharing with respect to grain shipments.
“Rail data in isolation, however, is insufficient in giving a meaningful picture of how the supply chain is operating. We strongly encourage data reporting and sharing among all supply chain partners,” the company said i n an emailed statement.
When disputes between carriers and shippers arise, companies can seek resolutions through a final arbitration offer (FOA) administered by the Canadian Transportation Agency. But most companies say the process is too costly and time consuming to be worthwhile and the smaller companies fear retribution from rail carriers if they push ahead with FOAs.
Teck has used the process several times in the past, but it can cost the company millions, Brad Johnston, the general manager of logistics and planning at Teck, told the transport committee.
The company also said Bill C- 49’s attempt to introduce new competition to the railways through so- called “long- haul interswitching” (LHI) is unlikely to be useful because many shippers are exempt from the provision. LHI effectively opens up rail lines to competing rail companies, including U. S. rail operators.
Earlier in the week, representatives for CN and CP said the government’s proposal to impose LHI fails to address the concerns of shippers in remote regions and could even crimp their ability to serve customers in farflung regions.
Shippers also say the LHI provisions appear to exempt many shippers based on commodity type and geographical location. Specifically, companies operating in the whole of B.C. and many located along Ontario’s main rail corridor are not allowed to apply for the right to use LHI, according to some shippers who proposed amendments this week.
Mining companies and other shippers say their amendments could meaningfully improve the standing of companies in remote locations — a disadvantage that has persisted for decades, they say.
Liberal MP Ken Hardie, a member of the transport committee, said there is an understanding more transparent data sharing can be useful to all parties if distributed correctly.
“We know in principle that there’s more data that needs to be shared,” he said.