13 October 2010

Railways Have Until 2013 to Shape Up

CN has rejected outright the need for more regulation.

Ottawa Ontario - A federal panel is recommending Ottawa give the country's largest railways two years to improve their customer service, or enact legislation that would force them to do so.
 
The recommendations are in an interim report by the Rail Freight Service Review panel, which was struck in 2008 to assess the level of service of Canadian National Railway Co. and Canadian Pacific Railway Ltd. and to determine if further regulations were required.
 
While a series of consulting papers concluded that shipping times and other services had improved since deregulation, many other issues remained.
 
One paper found nearly two-thirds of shippers surveyed had suffered major financial losses, often in the millions of dollars, as a result of poor rail service. Almost half said the service they have received has deteriorated over the past three years.
 
"The panel has concluded that there have been significant service problems within the system," the report states. "Although the railways have taken steps to address service issues, problems still remain."
 
The three-person panel recommends the railways implement a series of measures by 2013, including giving at least 10 days' notice to shippers for any change in service, establishing service-level agreements with customers, improving the data they share with customers, and implementing a low-cost dispute-resolution mechanism that would include a federally appointed mediator.
 
If the railroads do not implement the measures by 2013, the panel recommends Ottawa enact legislation, after a further review in 2013. One panel member argued that the legislation should not be drafted prior to 2013 because it would act as a disincentive for certain stakeholders, including shippers.
 
"These stakeholders prefer the legislative approach and will simply wait for the 2013 assessment in the expectation that the Governor-in-Council will trigger the amendments that are sitting on the shelf," he states in the report.
 
Bob Ballantyne, president of the Canadian Industrial Transportation Association, an industry group for shippers that includes dozens of companies from retailers to fertilizer producers, said he welcomed the interim report.
 
CITA has been advocating for further regulation of the industry, arguing that the railways often operate in markets where, due to a lack of infrastructure, certain shippers remain captive to one railroad.
 
"I would wonder whether the two-year window, with no firm timelines on some sort of government action if there isn't in an appropriate timeline, is really going far enough," he said.
 
CP and CN have rejected outright the need for more regulation, saying deregulation has proven a boon for both shippers and the railways.
 
The railways also noted that they have both been very active this year with efforts to address many of the concerns raised by the panel about their service. CN,in particular, rejected the recommendation for a federally appointed mediator, saying it was tantamount to forcing final-offer arbitration on any dispute with shippers. "The panel says the legislation would allow the federal Cabinet to invoke intrusive regulatory changes if it concluded they were justified, following a 2013 assessment of the state of rail-shipper relations," said Mark Hallman, CN's spokesman. "This awkward approach, a subject of panel dissension, with one of the three panel members rejecting it, would undermine the positive momentum of CN's supply-chain collaboration initiatives."
 
The interim report will now go out for consultation, with a final report expected from the panel by the end of the year.
 
Scott Deveau.