(The following story by Paul Marck appeared on The Edmonton Journal website on October 18.)
EDMONTON — Bad rail service has left Alberta’s forestry sector with angry customers demanding discounts for late delivery and mills scrambling for ways to ship their products.
Forestry companies, forced to make alternative arrangements, are filling warehouses and yards with inventory due to an unreliable supply of rail cars and shipping delays beyond their control.
Some shippers say that not only have rail problems become chronic, so has the excuse-making by CN, carrier for most manufactured goods in northern Alberta.
Due to a shortage of CN Rail cars for its mill in Edson, Weyerhaeuser trucks about 15 per cent of its production east to Edmonton for reloading at a CP Rail facility.
Railway officials acknowledge there have been problems but say millions of dollars are being invested to improve service.
Forest companies are feeling the delays on the bottom line.
Ainsworth Lumber, with a panel-board mill in Grande Prairie, says it can’t pass on CN’s excuses to its own customers.
CN’s inability to meet demand has cost Ainsworth goodwill and hard cash when it has not been able to meet shipping schedules, says Sean Mullany, the company’s transportation manager.
“We have suffered with respect to effectively serving our customers and it has resulted in price writedowns because of defaulting on our contract to ship within a given week,” says Mullany.
Ted Morton, Alberta minister of sustainable resource development, told forestry companies three weeks ago that railway competition will be investigated in the mandate of a newly formed MLA-industry panel on forestry competitiveness.
“You get the worst service and the highest rate,” Morton told the Alberta Forest Products Association.
Companies are clearly fed up.
“It’s a Canadian sport to beat up on the railways,” says Bill LeGrow, vice-president of transportation for West Fraser Timber.
West Fraser uses CN at all 20 of its lumber, panel board and pulp mills in B.C. and Alberta. Rail service is spotty at best.
“I wouldn’t say it’s a chronic problem at any one location. But it is a chronic problem. In CN’s case, there’s rarely a week that goes by when we don’t have a service crisis somewhere.”
Other companies tell similar stories.
Ainsworth moves the equivalent of 5,000 rail loads of panel board a year from Grande Prairie, most destined for U.S. markets.
But despite promises from CN over the last year to improve performance, Ainsworth is still waiting — and paying for alternative shipping.
Ainsworth is sometimes forced to truck from Grande Prairie to a U.S. rail head because CN cannot meet its obligations.
With low panel-board prices, “it just increases our losses, as opposed to minimizing any profits,” Mullany says.
Weyerhaeuser Inc. is unable to ship all of its 440 million board feet of annual panel board production from its Edson mill.
The company must truck about 15 per cent of its production 200 kilometres east to Edmonton to a CP Rail reload facility.
“In theory, we would like to ship all of that by rail. It’s more efficient than trucking, which costs more,” says Weyerhaeuser spokesman Wayne Roznowsky.
Weyerhaeuser has other rail complaints, too. It ships 99 per cent of its pulp production from Grande Prairie by rail.
But CN’s shuttling of cargo on branch lines means delays for customers, Roznowsky says.
Mike Voisin, director of business and public affairs for pulp producer Alberta Pacific Forest Industries, says his company faces similar rail challenges, with an added twist.
Branch-line operator Athabasca Northern Railway announced it will abandon the Linton to Boyle line as of Dec. 17.
Heavily used by the energy industry, the 250-kilometre link is also used by both AlPac and Millar Western Forest Products to deliver logs to their mills.
“You’ve got the most rapidly growing industrial area in North America coming on board that may not be served by rail,” says Voisin.
Without the Linton line, AlPac’s option is trucking an additional 60,000 hauls a year to and from its pulp mill in Boyle. That raises a host of problems, including safety, environmental concerns and a shortage of truck drivers, Voisin says.
Edmonton-based Millar Western Forest Products says that rail problems have had an adverse effect on business as well.
“We can acknowledge that it has affected our ability to ship products in an effective and timely manner and has affected our ability to receive supplies,” said company spokeswoman Janet Millar.
For its part, CN says it has encountered operational problems in northern Alberta, especially since taking over two short-line operations in 2006, the MacKenzie Northern line from Edmonton to Hay River, N.W.T., and the Savage Alberta line to Grande Prairie.
CN has invested $52 million in rehabilitating the lines, where some stretches are limited to speed limits of 16 km/h. Another $20 million will be spent next year, to get those slow areas up to a minimum of 40 km/h, said spokesman Jim Feeney.
Mark Wallace, CN’s vice-president of public affairs, said turmoil in the forestry sector has created scheduling problems for the railway.
But CN is working with its customers to iron them out.
“Yes, there have been some service issues and we are cognizant of them,” Wallace said.
“There’s a lot that we are doing proactively to make sure that our service meets (customer) requirements.”
CN says it meets 90 per cent of customer commitments and is aiming to improve that.
Meanwhile, the Forest Products Association of Canada released an independent study last spring showing forestry companies pay $280 million a year in extra rail costs. The study says those excess charges are levied in areas where there is no competition and mills are captive shippers of a single rail company.
Marta Morgan, vice-president of trade and competition for FPAC, says the industry is hopeful that Bill C-58 to
amend railway legislation passes in the next session of Parliament.
The measures would enable shippers to challenge poor service, excessive rates and rate increases, Morgan said.
FPAC also lauds the Alberta government’s examination of railway competition.
“It’s very encouraging. It shows that there is an understanding in Alberta that if we don’t fix this problem, it is going to impair the competitiveness of all the rest of our industries.”