Canada chemical industry welcomes bill to improve freight rail service

12 December 2012 03:12  [Source: ICIS news]

TORONTO (ICIS)--Canada’s chemical industry welcomes a government bill introduced on Tuesday to improve the country’s freight railway service, a trade group said.

Under the proposed legislation – the Fair Rail Freight Service Bill - all shippers will have the right to negotiate service-level agreements with rail carriers.

In addition, the legislation outlines an arbitration process between shippers and rail carriers to resolve disputes, as well as penalties should carriers fail to meet the terms of the service-level agreements.

Richard Paton, president of Ottawa-based chemical producers trade group Chemistry Industry Association of Canada (CIAC), said the legislation was of critical importance to chemical producers, given their heavy reliance on rail to ship product to customers.

“The level of service offered by Canada’s railways can make the difference between companies investing here, or taking their business elsewhere,” Paton said.

However, railway trade group Railway Association of Canada (RAC) warned that the legislation could erode trust between shippers and carriers.

In particular, information that is currently shared between railways and customers, such as status and availability of railcars, could potentially be used against railway carriers in a dispute, the group said.

“Any new regulatory approach will not replicate the commercial marketplace - no matter how well it is written,” said Michael Bourque, RAC's chief executive.

Bourque added that Canada already enjoyed the lowest rail freight rates in the world.

“Canadian rail rates are competitive with the US and significantly lower than China and Russia, even though freight rail is heavily subsidised in those and many other countries,” he said.

Claude Mongeau, CEO of rail carrier Canadian National (CN), said that there was no evidence of systemic rail service performance problems in Canada that warranted the federal government's introduction of legislation to impose service obligations on railways.

Instead, the legislation could put at risk innovation and supply-chain co-operation in Canada’s freight rail sector, Mongeau said.

Canada should not put the commercial framework of its rail system at risk through unnecessary and overly burdensome rail regulation,” he said.

“Such an approach would stifle innovation, chill the positive service momentum that's taken hold and result in potentially unintended consequences for the rail industry and the customers we serve,” he added.

The bill is likely to pass into law as the ruling Conservatives under Prime Minister Stephen Harper hold a majority of seats in parliament.

However, Canada’s largest opposition party, the NDP, called the bill “half-baked” and said it would seek amendments to further strengthen it in favour of shippers.

In particular, the NDP sees the maximum penalty of Canadian dollar (C$1) 100,000 ($101,000) rail carriers may have to pay in cases of breach of the service-level agreements as too low – “small change for the big rail companies with their multi-billion dollar profits,” said NDP transport critic Olivia Chow.

Canadian-based chemical producers move more than two thirds of their annual shipments by rail.

Chemical railcar shipments account for about 13.5% of Canada’s overall freight railcar traffic, ranking second after mineral ore shipment. 

For the first 11 months of 2012, Canadian chemical railcar shipments came to 501,062 carloads, down 6% from the same period a year ago.

($1.00 = C$0.99)

By: Stefan Baumgarten
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