Global Courant
MONTREAL –
A new rail transport rule is about to drive up inefficiency and cost to consumers.
Or it will drive them straight down. It depends who you ask.
An obscure law coming into effect with Ottawa’s federal budget bill has Canada’s two major railroads fighting back over spending and congestion concerns, with the drama playing out in social media posts and backroom lobbying.
At the heart of the train yard storm is legislation that aims to expand so-called extended interswitching, a rarely heard term describing a critical practice in the rail industry.
Interswitching refers to the transfer of freight between two railway companies at a point where their tracks meet. Extensive interswitching is when Company A needs to carry that load over its own tracks to a point where it meets Company B’s rails, and it is currently required on demand for distances up to 30 kilometers.
The practice is intended to encourage competition, since someone who, for example, can climb from a grain elevator onto the tracks of Canadian National Railway Co. shipped, could choose to have the cargo transported by Canadian Pacific Kansas City Ltd. if the price is better.
The budget bill, which passed the House of Commons on Thursday and now awaits Senate approval, proposes a pilot that would expand the transition zone to 100 miles by 18 miles in the three Prairie counties for an 18-month period.
The move is intended to depress prices, but it has shaken up Canada’s two rail giants, prompting them to go on the offensive to warn of the deep damage they say they will wreak.
“The transfer of freight will slow down traffic; they will eat up time and personnel,” says a CN Rail ad that aired on a Canadian political affairs podcast. “They cause delays. They drive up the costs of the rail. And who do you think will pay for that? The same person who always pays: the consumer.”
Shipping times will increase by up to 25 percent, the ad warns, likening the transfer of cargo to “forcing airlines to transfer passengers on different flights back and forth to their competitors rather than a direct non-stop.”
Echoing CN’s concerns, CPKC said the “drastic” and “extraordinary remedy” seeks to solve a non-existent problem in a move that will push inflation further up.
The railways have not stopped attempts to influence politicians either.
Lobbyists at Canadian Pacific had 96 meetings with public office holders in the first four months of 2023, the same number as all of 2022, according to the federal lobbyist registry. More than 30 officials involved – mostly those from Transport Canada – or ministries. Another 10 were sit-downs with members of the House of Commons or Senate transportation committee. The Railway Association of Canada has filed 17 lobbying reports since the start of the year, up from seven for all of 2022.
On the other side of the issue are the farmers, who disagree on almost every point. Industry groups say the change will lead to lower costs, higher efficiency, better access to markets and more competition.
The debate is heated. John Corey, president of the Freight Management Association of Canada, said the railroads have gone “above and beyond apoplectic” in their objections, calling their claims of congestion, job losses and US encroachment “BS”.
“They have control over their networks and control over their customers… without having to adapt to competitive forces or adapt to what their customers want,” said Greg Cherewyk, head of Pulse Canada, which serves 25,000 growers of peas, lentils and beans. “There’s an unwillingness to lose that power.”
Over the past month, groups ranging from the Alberta Wheat Commission to the Canadian Canola Growers Association have been promoting the effort on social media. Kevin Waugh, chairman of the Conservatives’ Saskatchewan caucus, has touted the liberal measure on Twitter as “greater flexibility in transportation choices” and “more efficient and cost-effective supply chains.”
Meanwhile, stances against the law have been a common thread in public statements from the Railway Association of Canada since the budget was introduced on March 28.
In an emailed statement, Marc Brazeau, CEO of the association, said U.S. railroad companies can “reach hundreds of miles into Canada” to pick up shipments involuntarily turned over by domestic railroads.
The Teamsters Canada Rail Conference, which represents 16,000 workers, also warned of potential job losses if U.S. operators increase business.
In addition, Ottawa pushed the change into the 2023 budget “without consulting the railroads,” Brazeau claimed.
The government based its decision on a recommendation from a supply chain task force report last fall, said Nadine Ramadan, a spokeswoman for transportation minister Omar Alghabra.
“The railways were actively consulted throughout the task force process and both Transport Canada and our office continue to communicate with the railways on a regular basis,” she said in an email.
The pilot is specific to the Prairies to avoid clogging major arteries, such as the BC Lower Mainland or the Quebec-Windsor corridor, she said.
“There are very minimal operational changes,” says Wade Sobkowich, head of the Western Grain Elevator Association, which processes 90 percent of the grain grown in any given year — mostly for export. When a similar three-year extended exchange rule went into effect in 2014, less than one percent of grain was exchanged within 100 miles of the point of shipment, he said.
Railroads hoping to avoid long transfer times could simply lower their prices to retain customers, he argued.
“What it does is it gives the shippers some bargaining power,” he said.
This report from The Canadian Press was first published on June 11, 2023.
