The federal government’s regulatory grip on the levers of Prairie grain freight has officially tightened.

Gov. Gen. David Johnston on Thursday granted royal assent to Bill C-30, the government’s Fair Rail for Grain Farmers Act, setting new minimum levels for the amount of Prairie grain that must be hauled this summer and allowing shippers to directly claim compensation for lack of rail service.

The act requires Canadian National (CN) and Canadian Pacific (CP) Railways to move one million tonnes of grain — roughly 5,000 cars per railway — every week through to Aug. 3, thus extending the volume requirements agreed to under the federal government’s March 7 order-in-council.

CN on Wednesday reported it expects to have averaged 5,500 carloads of grain freight per week in May, and expects to move “close to 6,000” hopper carloads of grain per week this summer.

The Canadian Transportation Agency (CTA) from now on will also advise the transport minister “as to whether minimum volume requirements may be required for the coming crop year,” based on consultations each year with railways, grain companies and others in the supply chain.

The act, as passed Thursday, also grants extending interswitching rights up to 160 km for grain and all other commodities moved by shippers in the three Prairie provinces.

Through interswitching, one rail carrier is committed to pick up cars from a shipper, then deliver them to another railway for the line haul. Previous legislation allowed shippers to use interswitching for only up to a 30 km radius.

C-30 also allows shippers to be “directly compensated for any expenses” incurred if railways fail to meet level-of-service obligations under the Canada Transportation Act.

The act also “strengthens accountability between shippers and the railways and strengthens farmers’ contracts with grain companies,” the government said in a release Friday, as Agriculture Minister Gerry Ritz marked the bill’s passage at an event at Fort Saskatchewan, Alta.

C-30 also grants the CTA regulatory authority to allow for “greater specificity” for operating requirements in any level-of-service agreements reached by arbitration between railways and shippers.

The government noted in March there have been no requests made for arbitrated agreements between shippers and railways since the government legislated the authority to do so in June last year. The tightened amendments in C-30 may make parties “more comfortable” in seeking arbitration, the government said.

C-30 also requires CN and CP to provide more detailed information on grain movements, “to allow for better oversight and monitoring,” the government said Friday.

It also includes sunset clauses which take effect in August 2016 if the bill’s measures are not renewed.

C-30 comes in the wake of attempts to clear a massive grain freight backlog on the Canadian Prairies, due in part to a record 76 million-tonne crop from 2013-14 and, according to CN and CP, unusually harsh winter conditions.

The backlog “put Canada’s reputation as a consistent and reliable supplier of quality Canadian wheat on the line,” Alberta Wheat Commission chair Kent Erickson said in an AWC release, adding C-30 “will help avoid any risk to Canada’s reputation in the future.”

CN noted Wednesday that Agriculture and Agri-Food Canada projects a grain carryover of 18.5 million tonnes on top of a total crop of about 62 million tonnes to come in 2014-15.

“True supply chain collaboration and normal commercial alignment — not ill-advised and unwarranted regulation as contemplated by the federal government — is what we need to help deliver this significant volume efficiently to the benefit of Canada’s grain-growing sector,” CN CEO Claude Mongeau said in a separate release.

Legislative review

The government noted Friday it has also pledged to accelerate its review of the Canada Transportation Act, to begin this summer.

“A strong message needs to be sent to the railways that they must live up to their obligations, and that there will be real consequences if they do not,” Art Enns, chair of the transportation committee for the Grain Growers of Canada, said in a GGC release.

The GGC said it will take an “active role” in the regulatory consultations on C-30, and in the Canada Transportation Act review, he added.

The Western Canadian Wheat Growers Association, meanwhile, said it’s concerned C-30 “does not ensure adequate penalty provisions will be incorporated into service agreements negotiated between grain shippers and the railways.”

The Wheat Growers said they’ll also call for strengthened running rights provisions an “incentive-based” cap on the railways’ Prairie grain freight revenue during the Canada Transportation Act review. — AGCanada.com Network