The Canadian Transportation Act Review has wrapped, but it’s far from a done deal.
The federal government could shelve the report, but that’s unlikely given the stakeholder interest, says Steve Pratte, policy development manager with the Canadian Canola Growers Association.
It’s also unlikely that the government will implement recommendations without consulting first, he adds. In fact, Transport Minister Marc Garneau has signalled there will be consultations, Pratte says.
The Canadian Canola Growers Association was one of several farm and grain industry groups that formed the Crop Logistics Working Group III. That working group submitted eight recommendations to the CTA Review, led by former cabinet minister David Emerson. And the Working Group has met since then to discuss the report and formulate a response.
Pratte says some of the CTA Review’s recommendations are positive and could be supported by the farm and grain sectors.
For example, the report recommends giving the Canadian Transportation Agency greater investigative powers. It also recommends allowing the agency to operate on an ex parte basis, meaning the Agency could act without having both parties participate.
But there are also recommendations that “raise red flags,” says Pratte.
Pratte says the report was a bit disconnected from the reality of the grain supply chain in the report. For example, there are only four locations across Canada with direct access to both railways, he says.
But while market power is mentioned, the report doesn’t fully appreciate “the role of market power and how that affects all these other issues — dispute resolution, commercial negotiation. All these different things relate back to that core piece of market power.”
The “hill to die on” for grain shippers is reciprocal penalties. If a shipper goes to arbitration on service level agreements, the arbitrator needs to rule on penalties, Pratte says.
Grain shippers face penalties or loss of incentives if they don’t load or unload rail cars on time. In fact, everyone within the supply chain is accountable to each other through contracts and financial consequences, with the exception of the railways, Pratte says.
Reciprocal penalties have been a key priority for grain shippers for over a decade, Pratte says. The report does mention reciprocity within one of the recommendations, but as Pratte points out, it’s not defined or fleshed out. That lack of discussion is an “eyebrow-raiser,” Pratte says.
Grain shippers are not advocating for “draconian government intervention,” Pratte says. But “appropriately tailored regulation” in cases of market failure is the government’s role, he adds.
For example, the CTA report recommends service level agreements take into account optimal performance of the entire freight system. But the Crop Logistics Working Group wants rail service to be demand-driven, rather than supply-driven.
Some issues are more important than others to grain shippers. When the Working Group sat down to discuss the report, “there was consensus around the table from these groups that the MRE piece is a bit of a diversion from broader issues of service.”
The Working Group would like to look at level of service obligations, define adequate service, and other framework questions that apply to all shippers before getting into rates, Pratte says.
Another secondary issue for the Working Group is the recommendation on mediation before arbitration. Pratte says they’re a little tepid on mediation, as it could amount to free discovery for the railways. “You’re going to be putting your cards on the table.”
The CTA Review recommends letting the interswitching limits shrink back to 30 km from 160 km. Part of the reasoning behind that recommendation was the claim that grain shippers aren’t using interswitching.
But grain shippers don’t have to actually use competitive provisions such as interswitching for them to be useful, Pratte says. Pratte says grain shippers have used interswitching as a “competitive tool” while negotiating service and rates.
Since the interview, the federal government extended the Fair Rail for Grain Farmers Act for a year, leaving extended interswitching in place for now.
Grain industry and farm groups plan to continue collaborating on an ad hoc basis, Pratte says.
Near the top of the group’s list is meeting with members of Parliament to explain what’s most important to grain shippers.
Pratte says they see any changes to the grain handling and transportation system as “a bit of a long game.”
“If they get into some of these more contentious issues that have rate setting issues and other things, they’re going to have to through technical consultations and what not, which CCGA and everyone else are prepared to get into.”