(The following article by Adrian Ewins was posted on the Western Producer website on December 18.)
SASKATOON — It’s not a subject that stirs the soul or sets the blood to rushing for most people.
But railway interswitching regulations are seen by some in the grain industry as a useful tool to increase competition between the railways and lower grain shipping costs for farmers.
Last week the Canadian Transportation Agency concluded a lengthy review of its interswitching rules by ordering the railways to lower by 10-20 percent the cost-based rates they charge for switching rail cars from one company’s tracks to another’s.
That was the good news.
The not-so-good news for the grain industry was that the agency didn’t adopt two proposals lobbied for by grain shippers.
It rejected calls by the Canadian Wheat Board to expand the geographic area to which interswitching rules apply and require the railways to maintain interchange points.
And it set aside for further study proposals by a number of groups to set up new rate categories to better reflect the way grain is shipped from prairie elevators.
Regulated interswitching rates apply to rail traffic within a 30 kilometre radius of an interchange point.
The CWB wanted that increased to 150 km, saying the closure of grain elevators and abandonment of rail lines over the past decade made the 30 km irrelevant.
“The lower rates are of very little value unless you get a competitive package that really works, and we really need these distances changed and some requirements for maintenance,” said CWB director Ian McCreary, who described interswitching as “another commercial lever” to encourage rail competition.
A University of Saskatchewan study indicated a 150 km limit would encompass 80 percent of the prairie elevator system.
However, the agency said the 30 km limit is in the Canada Transportation Act and changing it would require an amendment by Parliament.
“The law does not mandate the agency to extend the interswitching limits unilaterally,” it said.
Canadian National Railway spokesperson Jim Feeny said there is no need to extend the limit.
“I think the provisions that are there now promote competition,” he said.
A broad consensus of western groups, including the Western Grain Elevators Association and the Farmer Rail Car Coalition, asked the agency to set up interswitching rate categories for car blocks of 25, 50, 100 and more than 100 cars. Currently the only two categories are for blocks of more or less than 60 cars.
They said new categories are needed to better reflect the elevator and rail infrastructure on the Prairies.
The agency said that will require further consultation with the industry over the next few months.
The agency will also hold more discussions on whether the interswitching rates should continue to reflect a contribution of 7.5 percent over the railways’ variable costs.
Shippers generally support the 7.5 percent contribution. CNR told the agency 50 percent is commercially justified, while Canadian Pacific Railway says 25 percent would be fair and reasonable.
CPR spokesperson Leah Olson said the railway doesn’t believe interswitching rates should be regulated at all.
“It’s a service one railway provides to another, and it’s a rate that should be negotiated between the railways on commercial terms,” she said.