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CN shorted four grain firms on service: CTA

Four Prairie grain companies were short-changed on adequate rail service from Canadian National (CN) in the 2007-08 crop year, the Canadian Transportation Agency (CTA) ruled Thursday.

The four firms — North East Terminal, North West Terminal, Paterson Grain and Parrish and Heimbecker — were among six, also including the Canadian Wheat Board and Providence Grain Group, to launch a level-of-service complaint against CN at the CTA in September last year.

“Our grain terminals are now struggling to get rail cars when we need them for our markets because CN’s program requirements have been so rigid and unworkable for us,” said Perry Pellerin, manager at GNP Transportation and Logistics, a firm representing five Prairie inland grain terminals, in a CWB release Thursday.

“As a result, none but the largest grain handlers with multiple elevators could fit within CN’s service model, which strongly favoured those who can ship in large rail car blocks, week after week, to a single destination.”

The CTA previously found CN in breach of its federally-regulated obligations to the same six shippers in the 2006-07 crop year, and reserved its decision on 2007-08, pending more data. The agency ruled Thursday that, based on the “agency-established service performance benchmarks” for moving Prairie grain, CN breached its level of service obligations to the four companies in question for 2007-08.

Thus the CTA ordered CN, effective Thursday, to provide a level of service to the four affected companies as set out in the established service performance benchmark for crop year 2008-09 and beyond.

That means CN will have
to “confirm to (the four shippers) at a minimum, 80 per cent of their requested rail cars. Further,

90 per cent of the confirmed cars must be delivered either on time or in the subsequent two weeks (three weeks total). CN must meet these performance standards on a 12-week rolling average throughout each crop year. CN is still obligated to deliver all remaining confirmed rail cars.”

Furthermore, the CTA wrote Thursday, it feels the use of a performance-based benchmark to establish adequate and reasonable service levels “would benefit the western grain industry as a whole” and encourages railways and grain shippers to enter into a dialogue with the goal of setting performance-based standard levels.

“Not in breach”

The CTA found CN wasn’t in breach of its obligations to the CWB at a system level. For the first 25 weeks of 2007-08, CN delivered more than 80 per cent of the requested rail cars to CWB and more than 95 per cent of these cars were delivered either on time or in the subsequent two weeks (three weeks total).

For grain weeks 26 to 28, the CTA said, the deliveries fell below the CTA’s established threshold, but after the application of the 12-week rolling average, the percentages to those three weeks “increased to exceed the standard.”

Keith Bruch, vice-president of operations for Paterson Grain, said in the CWB’s release that the situation with CN highlights the dangers for “captive” grain shippers, who have no choice but to deal with a single railway company at most Prairie grain elevators.

“Without adequate competition in Canada’s rail system, there must be some way to ensure accessible service for all shippers — not just a select few,” Bruch said. “The laws governing grain shipping were created in recognition of this imbalance. It’s a shame that we are forced to continually battle to have CN comply with those laws.”

“Onus on CN”

The CWB’s chief operating officer Ward Weisensel said in the same release that the onus is now on CN “as to how it responds to the spirit and letter of today’s CTA decision.

“While the CWB is disappointed with the (CTA’s) assessment of CN’s performance on our shipments, there are positive elements in the ruling for the group as a whole and grain shippers in general,” he added.

“The concept of performance measures is good and the (CTA) has encouraged further dialogue to ensure that those measures are adequate and reasonable,” he said. “We are very keen to participate in such a dialogue as soon as possible.”

For its part, CN told the Reuters news service Thursday that the four affected shippers represent only about five per cent of its total grain freight business, and that it was pleased the CTA had rejected the complaint from the CWB, which controls the majority of grain shipments on CN lines.

CN spokesperson Kelli Svendsen told Reuters reporter Roberta Rampton that the railway was committed to working with all the shippers to make sure their service needs were met.

The Western Canadian Wheat Growers Association on Friday hailed the CTA’s ruling, granting that while it only applies to the four shippers in question, the case is “precedent-setting” and may help ensure all shippers receive an adequate level of service.

“The CTA ruling suggests that any shipper who is not  
being provided service at the benchmark levels will be able to apply to the CTA for relief,” the group said Friday.

The benchmarks established by the CTA may or may not be optimal, the group said, adding it will be looking
to the federal government’s level of service review, now underway, to determine whether these benchmarks are appropriate or “need refining.”
 

“These performance standards will give grain companies the ability to better manage their shipments and inventories  
to meet sales programs,” said Wheat Growers chair Mike Bast in the group’s release.

“The greater predictability of grain movement  
will allow companies to accept deliveries from farmers on a more timely and reliable basis.”

 

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