26 October 2012

Customers Eager to See New Rail Rules Take Effect

Canada - Lobby efforts are intensifying as the railways and their customers await new rail legislation expected to be introduced by the federal government later this year.
 
Officials with Transport Canada say Ottawa remains committed to tabling a bill this fall that will give shippers a legislated right to sign commercial service level agreements (SLAs) with the railways.
 
Among other things, the SLAs would define the responsibilities of shippers and rail companies as well as outline financial penalties that could be applied when either party fails to meet its contractual obligations.
 
Shippers say SLAs are needed to ensure acceptable railway performance on rail car placements, transit times, transit time variability, and other key performance measures.
 
If passed, the proposed legislation could also establish a formal process aimed at ensuring SLAs can be reached in the event that commercial negotiations fail between shippers and railway companies.
 
That process could include binding third party arbitration, an option the major railways oppose, and one that could jeopardize the relationship between shippers and railway companies, according to Claude Mongeau, chief executive officer of Canadian National Railway.
 
In a letter to CN's major railway customers, Mongeau asked shippers to step back, assess their relationship with CN, and consider how the introduction of more government regulations could affect service.
 
The use of arbitrated contracts could have serious, unintended consequences, he added.
 
"This use of arbitration is simply unprecedented in a market based economy and it would be a dangerous path to follow," Mongeau wrote.
 
"It could have serious consequences for the rail industry and, ultimately, the supply chain that serves you."
 
The federal government has been hinting for years that changes are needed to ensure a more level playing field between shippers and railway companies.
 
Interest in a legislated solution has been gaining steam since January 2011 when a federally appointed Rail Freight Service Review panel headed by former Alberta agriculture minister Walter Paszkowki submitted its final report to Transport Canada.
 
The panel's report contained recommendations aimed at "rebalancing the relationship" between railways and shippers. The government responded in March 2011, saying it accepted the panel's findings and was prepared to take four steps to improve rail performance:
 
·  a six month facilitation process involving railways and shippers and led by former Alberta MLA Jim Dinning, aimed at developing a template service level agreement and establishing a system for resolving commercial disputes;
 
·  federal legislation giving shippers the right to sign service level agreements;
 
·  the establishment of a commodity supply chain table to identify and address logistical issues and to establish a system of railway performance measurements;
 
·  an in-depth analysis of the grain supply chain to identify problems and identify potential solutions.
 
The Dinning process wrapped up earlier this year and failed to reach a consensus on key issues.
 
Since then, shipper groups, including farmers, grain handling companies, and agricultural exporters, have stressed the need for comprehensive legislation.
 
Greg Cherewyk, executive director of Pulse Canada, said the agriculture industry and shippers in general are optimistic.
 
"There's no reason to believe that we won't achieve a piece of legislation... that delivers what we asked it to deliver, and that was greater predictability in the relationship that we have between shippers and carriers."
 
Cherewyk said shippers have achieved an "unparalleled level of collaboration" and have presented concerns to Ottawa as a united voice.
 
"We haven't had any indication so far that they (Ottawa) haven't agreed or listened to anything that we've said."
 
Wade Sobkowich, executive director of the Western Grain Elevators Association, said changes are overdue. The association would like to see legislation that establishes communications protocols, improved methods for monitoring, and reporting of railway performance, a balanced dispute resolution process, and the use of arbitration if necessary in establishing service levels agreements.
 
"The Coalition of Rail Shippers started this process in May of 2006... to ask for changes in rail legislation," said Sobkowich. "It's been a very long time coming."
 
Sobkowich described Mongeau's comments as a desperate attempt to avoid legislation that will ensure better service for shippers.
 
Mark Hallman, CN's director of communications and public affairs, said his company is not opposed to entering service level agreements but is concerned by the tools that might be used to establish those agreements.
 
CN is proposing mediated agreements rather than binding arbitration. CN officials also argue that if mediated agreements are not possible, the Canadian Transportation Agency should be engaged rather than third party arbitrators.
 
Brian Cross.