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CN rips feds’ planned rail interswitching expansion

Mandatory extension of rail car interswitching and tighter grain freight regulations may “placate a vocal constituency” but will do little to move more grain and may harm Canadian businesses, Canadian National Railway (CN) warns.

The federal government on Wednesday introduced a package of legislative amendments promising increased regulatory oversight for rail grain freight and new rules to extend interswitching limits in the Canadian rail industry. [Related story]

“CN is disturbed that the government has decided to punish railways with re-regulation for an outsized crop and winter conditions totally beyond their control,” CN CEO Claude Mongeau said in a release Wednesday.

“The legislation does not address the root cause of the current grain situation and will do little to move more grain, now or in the future.”

Of particular concern to CN is the move to extend interswitching “without any due process to assess the potential consequences for railways and the Canadian economy.”

Not to be confused with joint running rights — which the government emphasized are not part of this bill — interswitching involves the transfer of traffic from one railway’s lines to those of another railway.

Today, where a shipper is served by only one railway — as is the case for 94 per cent of Prairie grain elevators, the government said — the shipper is entitled to transfer traffic to another railway if the shipper’s facility, at origin or destination, is located any point within a 30-kilometre radius of an interchange between the two railways.

The railway handling the short haul is paid at a regulated rate set by the Canadian Transportation Agency, CN noted.

Wednesday’s bill proposes to extend the interswitching radius to 160 km for all commodities handled by rail in Saskatchewan, Alberta and Manitoba — a move the government said would bring 150 Prairie elevators into a service radius to use a competing railway for their line hauls, up from just 14 today.

Expanded interswitching could possibly allow eligible shippers in certain areas to contract with U.S. as well as Canadian railways for their line hauls, the government said.

“This action could hit Canada’s railways by opening their business to unfair poaching by U.S. railways without any reciprocity,” Mongeau said Wednesday. “Beyond causing financial harm to CN, it could drain traffic away from Canadian ports and cause the loss of jobs, reduce investment and undermine tax revenues across Canada.”

“Highly intrusive”

CN said the proposed legislation will also give the Canadian Transportation Agency a “highly intrusive role in railway operating matters” in arbitrating service-level agreements for specific shippers, with the potential to cause “costly inefficiencies.”

“If the government is going to go through with this legislation,” Mongeau said, “we urge it to also subject grain elevator companies to greater regulatory oversight in order to ensure proper co-ordination and adequate resource allocation, with a view to creating surge capacity when crops are more sizable than the norm.”

It’s a “sad day for Canada,” he added, “when the government decides to hit one sector of the economy in order to placate a vocal constituency, instead of fostering sound commercial solutions to strengthen Canada’s transportation infrastructure.”

Canadian Pacific Railway (CP) had no official comment on the proposed federal legislation Wednesday. — Network

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