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Bill C-30 Facts

Bill C-30 factsFacts you won’t hear from the association lobby​​

​​​​​​​​Bill C-30, the ​​previous government’s so-called Fair Rail for Grain Farmers Act, was a knee-jerk political reaction to a record-breaking grain crop in Western Canada in the fall 2013. This legislation did nothing to increase the movement of Canadian grain; in fact, it continues to harm Canada’s rail supply chain by advantaging American railways and exporters, hindering supply-chain efficiency, encouraging regulatory interventions versus commercial solutions and constraining capacity-building railway infrastructure investment.​

2013/14 – A RECORD CROP​

LARGEST CROP ON RECORD

The 2013 grain crop was the lar​gest grain crop on record – 23.5 million metric tonnes (MMT) larger than a typical year’s crop. That is the equivalent of an extra 13 stadiums (734.5M cubic ft.) full of grain to be moved to ports and to customers in the U.S.​


​​SURPLUS OF PRODUCT UNEXPECTED​

Even under ideal circumstances, no efficient rail supply chain in the world could move an additional and unexpected 23.5 MMT of any product over a short period of time. A supply chain built for an unexpected 23.5 MMT would have excess and idle capacity in every normal year.​

NATURE OF THE GRAIN INDUSTRY

Given the nature of the grain industry, the product hits the rail supply for export at the same time each year (following harvest), causing a surge in demand that typically lasts into May/ June, depending on markets. Typically, from May/June until fall there is excess capacity.​

IMPERFECT 2013/14 WINTER CONDITIONS

The 2013/14 winter conditions were far from ideal with temperatures of minus 30 degrees Celsius or lower lasting for several weeks across the Canadian prairies, U.S. mid-west, and the important rail hub of Chicago. The rail supply cannot function at maximum capacity and velocity under harsh winter conditions. This forced slower train speeds, caused bottlenecks in Chicago, and prolonged the re-opening of the Seaway in Thunder Bay – an important export outlet for Canadian grain.​

CP grain performance

*Port closed on account of ice/winter conditions​

BILL C-30

Bill C-30 imposed a preferred status on export grain to the detriment of all other Canadian exports, as well as grain destined for the U.S., and domestic goods. The most harmful element of Bill C-30 is the expansion of the regulated interswitching limit to 160 kms from 30 kms for all commodities in the Prairie Provinces.

Interswitching is a legally mandated practice in the Canadian railway industry whereby one federally regulated railway performs the pickup of cars from a shipper, carries them a short distance, and hands them off to another federally regulated railway, which performs the long-distance haul. This arrangement is made in cases where a shipper only has direct access to one railway, but is within close proximity (traditionally 30 kms) to one or more competing railways. These movements do not involve shortlines.

The rate paid by the shipper for a railway to interswitch cars is regulated by the Canadian Transportation Agency, and in the case of the new extended interswitching zone, is noncompensatory. 

In other words, the amount that a Canadian railway gets paid for extended interswitching does not cover the cost of the movement, meaning the railway loses money for every interswitched order. As the extended interswitching rate is both regulated and non-compensatory, in effect it extends direct rate regulation across large portions of the rail network, putting significant negative pressure on railway revenue, and consequently, investment.

Regrettably, Bill C-30 extended the interswitching limit from 30 km – a reasonable distance for what is supposed to be considered a “local area” – to 160 km, creating a catchment area that is 28 times the size that existed previously. Extended interswitching:​

GRANTS AN UNJUSTIFIABLE ADVANTAGE TO U.S. RAILWAYS

The U.S. does not impose any interswitching requirements on its railways. As a result, the expanded 160 km interswitching zone allows U.S. railroads significant reach into Canada, at regulated non-compensatory rates, which is causing Canadian traffic to move to American railroads. There is no reciprocal provision under American law that allows Canadian railways to do the same in the U.S. This situation, created by Canadian legislation, is undercutting the competitiveness of Canadian railways and costing Canadian jobs.

CONSTRAINS THE ABILITY OF RAILWAYS TO INVEST IN NEW CAPACITY-BUILDING INFRASTRUCTURE

Which will be necessary to accommodate export growth and enhanced trade in the future. Further, it compounds the unjustifiable advantage given to U.S. railroads in Canada. A future capacity-crunch crisis, similar to what occurred with grain in winter 2013/14, cannot be avoided by curtailing railway infrastructure investments.

INTRODUCES SIGNIFICANT ADDITIONAL COMPLEXITY AND VARIATION INTO THE RAIL SUPPLY

Which reduces both capacity and velocity. It increases the number of railcar hand-offs and extends wait times ​for the entire rail supply chain, thereby increasing the complexity of managing railcar movements. Overall, this slows down the entire rail supply chain and reduces capacity because it introduces inefficiencies that could otherwise be avoided.​​

THE SOLUTION

It is in Canada’s long-term economic interest to build the most efficient rail supply chain possible - one that is optimized to benefit the greatest number of shippers in all segments of the economy. CP urges the government, which campaigned on a platform promise of “evidence-based decision making,” to carefully examine the facts and evidence, consider the harmful consequences of the previous government’s hastily-imposed and politically-motivated legislation, challenge shipper association rhetoric with facts, and reconsider its decision to extend the application of Bill C-30 beyond August 1, 2016.

New solutions to move greater volumes of Canadian exports more efficiently to the benefit of Canada’s entire economy will come from commercial partnerships and investment, not centralized regulation and free rides for U.S. railroads.​

IMPORTANT FACTS TO CONSIDER ​

GRAIN IS CP’S LARGEST LINE OF BUSINESS ​

Moving goods and resources is how railways make money. In 2014 grain carloads on CP represented 17.3 percent of total carloads. Crude was 4.1 percent. In 2015, grain carloads on CP represented 16.8 percent of carloads. Crude was 3 percent. 

CP CONTINUES TO MOVE RECORD VOLUMES OF WESTERN CANADIAN GRAIN AND GRAIN PRODUCTS ​

And did so after the mandated grain minimums were lifted on March 28, 2015 (see Chart 1). For the 2015/16 crop-year to date (to May 2016)​, we have moved 216,998 carloads, 4.8 percent more than last year (a record), 10.4 percent above our three-year average, and 16.7 percent above our five-year average. 

CP’S AVERAGE GRAIN RATE PER TONNE IS $41.30 ​

This means we move a tonne of grain for $41.30 over a distance of 1,440 kms. The rail supply chain is one of most efficient and cost-effective in the world. This is why Canada can compete over long distances against grain grown at tidewater in other locations such as Australia. Interventions like Bill C-30 undercut that efficiency and cost-effectiveness. ​

THE AVERAGE PRICE FOR A TONNE OF CANOLA IS $490 

The rail rate represents 8.4 percent of that value. The average price for a tonne of wheat is $230. The rail rate represents 18.0 percent of that value. ​

FARM INCOMES RISING 

Farm incomes from grain and oilseed production rose 189 percent to $13 billion from $4.5 billion in 2000. That’s an annual growth rate of 7.3 percent - far greater than most sectors of the economy​.

THE RAIL SUPPLY CHAIN HAS RETURNED TO NORMAL 

After moving record amounts of grain because of the extraordinary 2013/14 crop, the rail supply chain has returned to normal. This means there is now excess capacity in the supply chain; CP will have thousands of rail cars in storage this summer waiting for this fall’s grain harvest.​

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