RAIL SERVICE AND CAPACITY ISSUES IN BC (2007)

Legislative amendments to the Canada Transportation Act (CTA) are currently being considered by the Federal Minister of Transportation. The transportation of export commodities by rail to BC’s tidewater ports is crucial to the economy of BC and Western Canada. The Chamber of Commerce supports the enactment of provisions which will improve the rail service provisions of the CTA and foster sustainability of BC’s social and economic benefits derived from international trade.

The level of railroad service to and from lower mainland port terminal operators has deteriorated in recent years. This presents two major challenges, increasing throughput capacity while managing and reducing demurrage charges (costs incurred in keeping rail cars or vessels waiting). Unreliable rail system performance has increased operating costs and acts as a disincentive to future investments in terminal storage and handling capacity. This capacity is needed to ensure that the terminals will be in a strong competitive position to serve BC’s and Western Canada’s critical exports (potash, coal, vegetable oil, grains, pulp, sulphur, woodchips), especially, those that cannot be served singly through Prince Rupert.

North Shore terminal operators, the majority of which are export-oriented, are highly dependent on the products listed above arriving “on time” to ensure BC and Western Canada are seen as dependable suppliers to export markets. It is estimated that inadequate rail service has added costs in excess of $20 million annually on terminal operations within the Lower Mainland, eroding their competitiveness. For the North Shore particularly, CN Rail has a monopoly to service a public asset, the Port of Vancouver. There is a lack of balancing provisions in the current Canada Transportation Act (CTA) requiring “two-way” commercial relationships between railroads and other parties in the supply chain.

Although the Greater Vancouver Gateway is marketed overseas as having an integrated rail system, comprised of CP Rail, Burlington Northern Santa Fe (BNSF), CN Rail and the Roberts Bank line, complex rail access agreements are in place. CN Rail’s exclusive access to the North Shore of the Burrard Inlet was derived from one of these agreements, the “1953 Agreement” between CN Rail and the then National Harbours Board (renewed by VPA/CN in 2003 for a further 50 years). This agreement precludes line-haul carriers such as CP Rail from delivering their own motive power and the shipper’s or their own railcars directly to the destination terminal. CN Rail must be in a position to match crew resources to other railways’ trains, otherwise rail service failures can and have occurred.

In recent years the railways have entered into a series of agreements to improve the utilization of the rail-track, improve their operating efficiency and reliability. For example, CP and CN began directional running through the Fraser Canyon several years ago. In 2006, in a further attempt to improve rail traffic fluidity in the Lower Mainland, CN, CP and BNSF entered into a series of co-production agreements to manage these complicated ownership rights. This has resulted in an environment for sustainable improvements to rail capacity and service; however, there is now a need for the railways manning practices continue to keep pace with volumes.

To illustrate one example: CP Rail delivers unit trains carrying potash and grains from Saskatchewan, coal from Southeastern BC and sulphur from Alberta to Boston Bar, where they are then boarded by a CN Rail crew which replaces the CP crew. When all goes well, there is a CN crew available whenever a CP train arrives. The final leg of this journey sees the commodities delivered in a timely fashion to a marine terminal at the North Shore. Variables to a timely arrival include weather conditions that may affect the rail line, labour issues and co-ordination between both railways with respect to crew schedules. Weather conditions are not controllable, but a service agreement between the shipper/terminal operator and the railroads is. If a CN crew is not available, this can result in potash/coal/sulphur/grain trains sitting for long periods in Boston Bar. The terminal expecting these commodities must schedule labour crews specifically for the arrival of the rail cars from Boston Bar that will sit idle if they do not arrive. The cost of labour called out but not used is estimated to be about $5 million annually. Because of the ownership rights (railway monopolies) that exist, there is little that terminal operators can do to influence better co-ordination and reliability between railways. Enforceable, effective written service models (agreements) between shipper/terminal operators and railroads do not exist and the existing Canada Transportation Act is weak in defining an appropriate level of service to allow development of a service model for marine terminals.

The railways are public entities of strategic national importance and operate to maximize profit for their shareholders. They must also serve the national interest by providing reliable cost-effective service to shippers. Increased throughput and reliability of service will improve the capacity of port terminal operations, resulting in future investment and improved competitiveness. The movement of product by rail is cost-effective and environmentally sustainable.

The importance of the ports in British Columbia to the overall economic performance of the province and country is critical. The demand to move imports and exports in the most efficient and effective manner possible is key to maximizing that economic impact. Rail service is the major transportation mode used in moving products into and out of many of our ports. The federal statute that governs the provision of rail service is the Canada Transportation Act. The service provisions for railways defined in that statute quite simply have not kept pace with the nature and demand of exports and export ports. Canadian shippers have identified a definite need to make that statute more contemporary and to better reflect the needs of shippers today and into the future. The Chamber supports this need for change.

THE CHAMBER RECOMMENDS

That the federal government amend the railroad service provisions of the Canada Transportation Act in the current Act review process. The objective should be to obtain changes to the provisions of the Act such that for every substantial movement a railroad has to quote a service model and commit to enter a service agreement with shippers and other transport service providers such as marine terminals.