An announcement last week from the federal government that both national railways will face monetary fines if they don’t make a minimum grain-transportation quota was welcomed by Alberta and Saskatchewan provincial governments and agriculture agencies.
Last Friday, federal Transport Minister Lisa Raitt made the announcement in Winnipeg, accompanied by federal Agriculture Minister Gerry Ritz.
Both Canadian Pacific and Canadian National railways will be required to transport 500,000 tonnes of grain each per day, a number that works out to about 5,500 grain cars for each railway.
If the companies don’t meet the quota, they’ll be fined $100,000 for each day out of compliance, the minister said during the news conference. Raitt said neither company was given a warning about the impending order, which was signed in council.
The federal government is allowing both companies four weeks to ramp up to the minimum level.
For Stettler farmer Keith Rairdan, the news is good news, because most of his grain harvest is still sitting in the bins, waiting to move.
“We got most of the canola gone (at the start of the season),” Rairdan said, “but wheat’s a different story.”
While he said he hasn’t been as impacted as other farmers, because he raises cattle as well as grows wheat and canola, he admits it has hit his wallet. “It makes cash flow a bit tighter,” he said. “We just have to watch what we spend money on.”
A record-large harvest in Alberta and Saskatchewan, paired with reduced rail transportation levels due to frigid winter temperatures, has created a bottleneck in grain transportation which has left much of the crop in grain bins in both provinces.
Agriculture organizations and farmers have been railing against the delays, citing lost income due to fluctuating grain prices.
“Our government is well aware of the challenge facing farmers across Western Canada,” Raitt said at the news conference. “This is a very serious situation.”
Not only does the grain backlog hurt farmers, Raitt said, it also risks Canada’s reputation as a dependable supplier of grain. Demand has increased since unrest in the Ukraine, the world’s third-highest grain exporter, erupted in February.
“We have to demonstrate Canada can maintain an efficient transportation system which is capable of moving our grain to market,” Raitt said.
“This is an issue of great significance and we have to address it in a timely manner.”
The opposition, while supporting the federal government’s actions, weren’t impressed with the numbers handed out by the order.
“It’s far too little and it’s very, very late,” said deputy Liberal leader Ralph Goodale.
NDP agriculture critic Cathy Sproule was much of the same mind.
“(Friday’s) announcement does nothing to compensate producers that have lost billions, and the 5,500 cars required from each company only reflects what the rail companies have already promised for spring,” Sproule said.
Rairdan agreed that the government could have acted earlier.
“It seems the railways have all the power,” he said. “But they are a for-profit company, so they move what makes money.”
The railways have gone on the defensive since the grain backlog became a hot topic in federal and provincial parliaments, with Canadian Pacific Railway even taking out full-page advertisements in the Globe and Mail and the National Post “setting the record straight” about the railway’s management of grain shipments during the winter.
“I’ll be the first to admit that our usual service levels aren’t being met during this period when all commodities in the entire supply chain are impacted by this brutal weather,” Canadian Pacific chief operating officer Hunter Harrison wrote in the advertisement.
“Moving grain from the farm to the port is a complex pipeline involving many parties,” he wrote.
“Canada’s largest-ever grain crop and this winter’s weather created the ‘perfect storm.’”
While Raitt was willing to give the railways some leeway because of the weather, acknowledging the cold temperatures required shorter train loads due to braking issues, others have not been so kind. Rairdan, however, said he understood some of the logistical difficulties the port in Vancouver pose the railways.
“They can only move so much grain, because of the bottleneck in Vancouver,” he said. “There’s only so much room for trains and for trains to turn around.”
The order-in-council was relatively unexpected, as just days before Raitt was defending the railways and the resulting backlog in the standing committee on transport infrastructure and communities just a day earlier.
Canadian Pacific Railway and Canadian National have an extra 20 million tons of grain to haul this year as a result of the bumper crop, Raitt told the committee last Thursday, in an answer to Liberal MP David McGuinty.
“That exceeds the entire potash industry in one year, in one fell swoop,” she said.
The rail companies base their business plans on five-year averages, Raitt told the committee, which means the excess in the 2013 harvest was not anticipated.
“We do expect that rail should have the capacity to have a surge,” Raitt told the committee. “That was exacerbated by the weather we’ve had this year. Minus 25 and below causes trains to have to be shortened in concerns to people’s health and safety in concerns of operation.”
Some local agricultural groups aren’t buying the cold-weather explanation, and have accused the train companies of making grain a second- or third-priority cargo, behind cargo such as oil.
Alberta agriculture minister Verlyn Olson said that isn’t the case.
“Basically, everyone’s unhappy with rail transportation right now,” he said. “The oil companies are unhappy with delays. The coal industry would be another that probably has issues.”
The MP for the riding of Crowfoot, of which Stettler is a part, said the order was a good move.
“The railways will be required to increase the volumes carried each week ... more than doubling the volume currently being moved,” Kevin Sorenson said in a news release.
As part of the Friday news conference, Ritz announced the federal government is also looking to introduce legislation to ensure the country maintains a “world-class logistics system,” which will in turn move all products, not just grain, to market faster and reliably.
“In our region of the Prairies, we are all looking forward to this promised legislation,” Sorenson said.