The federal government’s March 18 announcement to guarantee a shipper’s right to a service agreement with railways promises to shift the national balance of power to shippers and away from Canada’s rail giants.
Rail companies say the government’s legislation isn’t needed, given the strides they’ve made over the past two years to create service agreements with shippers, ports and terminals across Canada.
These include agreements CN (TSW:CNR; NYSE:CNI) and Canadian Pacific (TSX:CP; NYSE:CP) have made with Port Metro Vancouver (PMV) and Deltaport, operators of the port’s largest container terminal.
Moreover, Mark Hallman, CN’s director of communications and public affairs, said there’s concern the government’s move might undercut agreement momentum.
“We’re concerned that the government is tilting toward a legislative route, which would add burdensome regulation to the rail industry that could stifle the innovative agreements that CN has been unveiling with a variety of customers over the past year and a half or two years.”
But Minister of State for Transport Rob Merrifield, who two years ago launched the recently completed federal rail freight service review to examine problems in Canada’s rail-based logistics system, said the legislation isn’t meant to slow negotiated agreement momentum.
“The railways are right in their comments in the sense that a negotiated settlement where both parties understand each other’s needs and do what they can to fulfil those – that’s the ultimate goal,” he said. “The legislation just backstops that to give a clear process as to how that’s going to take place.”
On the shipping front, both the Western Canadian Shippers Coalition and the Canadian Industrial Transportation Association have voiced support for the government’s initiative, which also includes:
- a six-month process with shippers, railways and other stakeholders to negotiate a template service agreement and streamlined commercial dispute resolution process;
- establishing a commodity supply chain table to address logistical concerns and develop performance metrics to improve competitiveness; and
- a Transport Canada/Agriculture and Agri-Food Canada collaboration to analyse the grain supply chain.
Merrifield added that since Canada’s railways started negotiating service level agreements in the last year or so, improvements have been noticeable.
“CN particularly has really worked hard at upping their game,” he said. “They’ve told me their bedside manner was terrible; now, their new CEO [Claude Mongeau] is in place and he has worked very hard to improve service.”
Chris Badger, COO for PMV, said the port has been working for several years to identify and solve efficiency bottlenecks between rail and container terminals.
In the last couple of years, he said CN and CP signed agreements with the port committing to level-of-service agreements with any of the port’s terminals that wished one. Badger said the most advanced agreements thus far have been between both railways and TSI Terminals Systems Inc., which operates Deltaport. The results, he said, have been tangible, particularly in reducing the time between when a container is discharged from a ship and when it heads off on a train. He said that time has dropped by between 0.5 and 2.5 days over the past two years.
Both Hallman and Mike LoVecchio, CP’s senior manager of media relations, said the railways have seen direct positive results from their agreements with TSI Terminals.
That view is shared by Eric Waltz, president of TSI Terminals’ parent company Global Container Terminals Canada.
A key success for the terminal, he said, has been a 40% improvement in operational performance this past Christmas season compared with Christmas 2009.
With efficiency gains in the port’s container business, Badger said the next hurdle is to enable new efficiencies between railways and bulk terminals – particularly on the grain front.