(Reuters circulated the following story by Roberta Rampton on July 6.)
WINNIPEG, Manitoba — Canadian National Railway Co. must change the way it allocates rail cars to give better service to small grain shippers, the Canadian Transportation Agency said on Friday.
The CTA ruled against Canada’s largest railway after Great Northern Grain Terminals Ltd., a small grain company from northern Alberta, complained that CN Rail had changed the way it distributed cars to favor 100-car trains.
The agency agreed that the railway’s car allocation programs made it hard for small shippers that cannot handle the long trains to secure enough cars.
Great Northern Grain was backed by other small shippers, who argued CN’s programs threatened their long-term survival, as well as by farm groups, the Alberta provincial government and the Canadian Wheat Board, the country’s largest grain exporter.
“We’re very pleased that the agency stated that it’s a systemic problem,” said Mark Dyck, the CWB’s manager of rail logistics.
CN Rail was still studying the decision on Friday, and was not ready to comment in detail, spokesman Jim Feeny said.
But Feeny said CN had implemented a change last week that was suggested on Friday by the regulator.
“It will enable … small shippers to order blocks of 50 rail cars in advance,” he said.
Rail service is a frequent sore spot for the Canadian grain industry, which ships its produce to ports that are more than 1,000 km (600 miles) from the key Prairie growing region.
Canadian law compels CN and Canadian Pacific Railway provide adequate service to shippers.
Rail car allocation used to be jointly set through an industry group, but in recent years it has become more directly negotiated with individual grain companies.
Railways have focused on serving large elevators on their east-west pipeline to try to make the complex grain handling system more efficient, said James Nolan, a transportation economist at the University of Saskatchewan.
But CN went too far with its current program, Nolan said, becoming what the CTA called “the arbiter of which of its captive shippers are eligible for a competitive advantage.”
“Through its virtually exclusive control of rail service in portions of the western Canadian grain market, CN creates an imbalance and … a failure in the marketplace,” the CTA said.
The agency ordered CN to develop a program by Aug. 1 that would let Great Northern Grain order blocks of 50 rail cars in advance. It also said CN must let the company trade cars, and told it to work with other shippers on the same problem.
“It’s a pretty big deal,” Nolan said, noting the CTA used unusually strong language in its decision. “I think the railways are going to be suitably angry over this decision.”
The ruling will also be scrutinized by shippers and railroads in the United States, who face the same issue, Nolan said.
And he said it will help ensure small shippers can compete with grain giants if the federal government makes good on promises to end the Canadian Wheat Board’s monopoly on wheat and barley shipments.
“It will help smaller shippers gain access to foreign markets, and that’s what they’re going to need to survive in a post-Wheat Board world,” Nolan said.