Cus­tomers blame ef­fi­ciency drives at rail­roads for win­ter grain back­logs

Push to de­liver re­turns for share­hold­ers cre­at­ing vul­ner­a­ble sys­tem: lobby group

Regina Leader-Post - - YOU - ROSS MAROW­ITS

Canada’s two largest rail­ways are hop­ing the spring thaw will help them re­cover from a win­ter of de­lays and com­plaints brought about by the com­bi­na­tion of bru­tally cold con­di­tions and un­ex­pect­edly high de­mand — and de­frost the re­sult­ing icy re­la­tions with cus­tomers.

Cana­dian Na­tional Rail­way and Cana­dian Pa­cific Rail­way have faced in­tense scru­tiny over ex­tended ship­ping de­lays this win­ter that have cre­ated a back­log in grain ship­ments. They point, largely, to a colder-than-usual win­ter, which they say can cre­ate a num­ber of con­di­tions — from mal­func­tion­ing switches to icy tracks — that force them to slow down and run trains with fewer cargo cars to en­sure safety.

But some cus­tomers blame a cost-cut­ting and ef­fi­ciency fo­cused push known as “pre­ci­sion rail­road­ing ” for di­min­ish­ing ca­pac­ity and flex­i­bil­ity to deal with un­ex­pected changes in de­mand. They point to re­duc­tions in crew, lo­co­mo­tives and cars in a drive to boost bot­tom lines for rail­roads.

“The prob­lem is that pre­ci­sion rail­road­ing isn’t very pre­cise,” said Wade Sobkowich, ex­ec­u­tive di­rec­tor of the Western Grain El­e­va­tors As­so­ci­a­tion, in an in­ter­view.

De­vel­oped 20 years ago by the late leg­endary rail­way ex­ec­u­tive Hunter Har­ri­son, pre­ci­sion rail­road­ing aims to im­prove ef­fi­ciency by mov­ing trains on a sched­ule to op­ti­mize rail­car and lo­co­mo­tive use in­stead of hold­ing trains un­til they are full.

Sobkowich said this ef­fort to drive ef­fi­ciency and de­liver re­turns for rail­way share­hold­ers has re­moved ex­cess ca­pac­ity and made the sys­tem vul­ner­a­ble to break­downs.

It’s a charge that Rail­way As­so­ci­a­tion of Canada act­ing pres­i­dent Ger­ald Gau­thier re­jects, adding rail­ways are required to move any­thing cus­tomers de­mand and scale up or down to meet that obli­ga­tion.

“The pur­pose of pre­ci­sion rail­road­ing is to cre­ate ef­fi­ciency and to im­prove ca­pac­ity be­cause your net­work is fluid,” he said in an in­ter­view.

CN Rail chief op­er­at­ing of­fi­cer Mike Cory told a par­lia­men­tary agri­cul­ture com­mit­tee ex­am­in­ing the back­log is­sue that the com­pany, which en­coun­tered far greater dif­fi­cul­ties this win­ter than its ri­val CP, didn’t have enough lo­co­mo­tives or crews to meet the un­ex­pected vol­ume growth. The rail­way an­tic­i­pated 2017 de­mand would grow three per cent, but it came in at 11 per cent, in­clud­ing up to 25 per cent in some ar­eas.

“After six con­sec­u­tive quar­ters of flat to neg­a­tive growth, we un­der­es­ti­mated the level of growth that was about to come at us.”

Both CP and CN rail­ways had cut back jobs and put lo­co­mo­tives in stor­age as car­load­ings fell, par­tic­u­larly in 2015 and 2016. Mean­while, a bumper grain crop of nearly 71 mil­lion tonnes last year — al­most 10 per cent more than fore­cast — would soon need to be shipped.

At the same time, de­mand from other com­modi­ties also rose. CP Rail said the num­ber of crude car­loads in the first two months of the year were up 59 per cent from the prior year. On top of this, an un­ex­pected wave of prod­uct from in­ter­na­tional in­ter­modal con­tain­ers be­gan ar­riv­ing on ships, plus in­creased vol­umes of frac sand and potash.

Heavy snow, avalanches and 78 per cent more days be­low -25 C forced the rail­ways to re­duce train speeds and run shorter trains to move prod­ucts safely.

The ser­vice prob­lems are be­lieved to have cost CN’s chief ex­ec­u­tive his job as Luc Jobin was re­placed with Jean-Jac­ques Ruest. It has also apol­o­gized for the back­log and said it will al­lo­cate some of its cap­i­tal spend­ing bud­get to build dou­ble tracks and sid­ing ex­ten­sions in Western Canada to im­prove ef­fi­ciency.

Cana­dian Pa­cific has said it is start­ing to re­cover from the win­ter weather and is adding crews and lo­co­mo­tives.

But for farm­ers, who are los­ing money as train­loads of their grain sit empty, the win­ter weather ex­pla­na­tion is cold com­fort.

“It’s pretty out­ra­geous that we’re talk­ing about this when we had such a ma­jor cri­sis just four short years ago,” said Todd Lewis, pres­i­dent of the Agri­cul­tural Pro­duc­ers As­so­ci­a­tion of Saskatchewan.

In 2014, sim­i­lar ten­sions flared be­tween farm­ers and the rail­road du­op­oly when the rail­ways of­fered a sim­i­lar bad weather ex­pla­na­tion for a sim­i­lar grain bot­tle­neck.

The Con­ser­va­tive govern­ment of the day or­dered the Mon­treal and Cal­gary-based rail­ways to move a com­bined one mil­lion tonnes of grain per week in the spring or face fines of $100,000 a day.

The cur­rent govern­ment is pres­sur­ing the rail­ways to clear the back­log, but hasn’t yet re­sorted to such ac­tion as some ship­pers have de­manded.

In­stead, it is push­ing for the Se­nate to pass a mas­sive trans­porta­tion bill cur­rently stalled in the up­per cham­ber that would im­prove pub­lic re­port­ing by rail­ways and al­low for fi­nan­cial penal­ties if they fail to de­liver rail cars on time.

One of the rea­sons grain may be left sit­ting is that rail­ways pri­or­i­tize higher value traf­fic, said James Nolan, a pro­fes­sor in the depart­ment of agri­cul­ture and re­source eco­nomics at the Univer­sity of Saskatchewan.

“They know grain is storable, they know grain can es­sen­tially sit and I think they’re just be­ing ra­tio­nal,” he said in an in­ter­view.

How­ever, a coali­tion of rail ship­pers in­clud­ing as­so­ci­a­tions rep­re­sent­ing the for­est prod­ucts, min­ing, fer­til­izer, chem­i­cal in­dus­try and freight man­agers point out ship­ping prob­lems aren’t con­fined to the agri­cul­ture sec­tor.

Ul­ti­mately, the abil­ity of rail­ways to have ca­pac­ity to meet de­mand comes down to in­vest­ment de­ci­sions, said Bren­dan Mar­shall, a vice-pres­i­dent for the Min­ing As­so­ci­a­tion of Canada.

“It’s a sys­temic is­sue and un­less we can ad­dress that na­ture of the is­sue then there’s no rea­son to be­lieve it won’t per­sist.”

THE CANA­DIAN PRESS

CN and CP say a bru­tal win­ter has led to mal­func­tion­ing switches and icy tracks, which force them to slow down and run trains with fewer cars to en­sure safety. But a group of rail ship­pers isn’t buy­ing it, ar­gu­ing that, the abil­ity to meet de­mand comes...

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