Op Ed - Canadian Transportation Act Review Totally Fails Farmers
by Terry Boehm
The Canadian Transportation Act Review conducted by a panel hand-picked by the previous Harper government repeats a tired litany of platitudes: “Deregulation will lead to efficiency.",—"The railways once freed of regulation will invest in their businesses thereby improving service." "Grain should not be treated any different than any other commodity." — "The Revenue Cap should be eliminated."— "The system must be fully commercialized.”- "Common carrier obligations must be assessed on a system wide basis." And the list goes on.....
These arguments fly in the face of the practices of Railways for well over 120 years. In the 1980's the railways promised they would double track their mainlines to improve service once the Crow Rate was ended. They got what they asked for. Guess what we got? No double tracks and the service declined! Then the railways' wanted to abandon branch lines. The cost of the collapse of the branch line system was offloaded on to farmers: We have to store our whole crop on farm in ever bigger and numerous grain bins, haul further distances requiring bigger trucks, and buy branch lines and finance short line railways in many instances. Invariably we get to pay higher freight rates with each transportation act review and the legislative changes that follow.
Without regulation grain freight rates will become discriminatory and so expensive that prairie agriculture will lose any hope of just returns for farmers. Railways seek to maximize their profits not by investing in new infrastructure but by extracting as much as they can from farmers. Their shareholders expect this.
The Canada Transportation Act Review panel fails to ask the question: Why have the railways not invested much more in rolling stock and staff to improve service? Even with the revenue cap on grain the railways are very generously compensated. The standard railway measure of returns, called the contribution level is far in excess of the railways own norms by 150 million dollars a year (for grain alone). This one would think would bear questioning by the review panel. Instead they recommended first changing and then ending the revenue cap within 7 years.
My freight rate is approximately $50.00 per tonne from Saskatoon plus loading and unloading costs (elevation charges). This means that a 100 tonne hopper car generates $5,000.00 each time it is loaded for the railways. A standard 100 car unit train, generates $500,000.00 hauling grain to the west coast. One would think that half a million revenue for each 100 car train would be sufficient.
The Review Panel calls for one third of grain cars to be allocated by a premium bid car service. Shippers would bid to get faster service or access to cars and service becomes even poorer for cars outside of the premium bid car fleet. Ultimately the premium rate will be the rate farmers will pay.
In Canada federal railways have common carrier obligations and cannot discriminate who they will do business with. This means that the railways must move a properly loaded car to its destination. If they do not comply, level of service actions can be brought against them and the Canada Transportation Agency can order them to service the customer. The CTA Review Panel recommends that the test for determining whether a level of service complaint can be brought is whether the railways are serving the system as a whole rather than individual customers.
Farmers are captive shippers, rail freight rates are one of their biggest costs, they are price takers and do not have the ability to set prices for what they produce. This is why grain has always been treated differently in the freight rate regime in Canada. We should not forget that agriculture and prairie grain exports are one of the biggest positive contributors to Canada's balance of payments and her economy.
What the panel should have done is call for a full costing review of the railways and for the sharing of efficiency gains to accrue to farmers by adjusting the revenue cap downward. They should have looked at the revenue cap and called for a reformulation of its calculation to take into account that costs for the railways have declined significantly. Fuel is just one example. They should have protected common carrier obligations rather than recommending weakening them.
Farmers rightly expect rate controls, good service, and rate adjustments downwards because railway profits are excessive.
Enough is enough!
Terry Boehm is the former President of the National Farmers Union
Director of Research and Policy
National Farmers Union
Phone (306) 652-9465
Fax (306) 664-6226
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