Report looks to improve rail service

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April 2, 2015 8:15 AM

On March 30, the Saskatchewan Chamber of Commerce released a report they commissioned to the Commerce Board of Canada regarding rail services for the province’s exports.

After a series of problems stemming from 2013’s bumper crop, after which growers had trouble getting their surplus of inventory to market by rail, the Saskatchewan chamber came up with the idea for their report: The Impact of Rail Access on Saskatchewan’s Export Potential.

The research looks at ways to make rail services more efficient in effort to avoid these inconveniences from happening again down the line.

“In 2013, we had a bumper crop in Saskatchewan, that’s great news. We also had in 2013-14 a lousy winter, which made it difficult for the rail lines to get the crop out of the province and all kinds of things hiccuped over that situation. We said, “Let’s make sure that doesn’t happen again,’” said Saskatchewan chamber CEO Steve McLellan.

“Let’s first get the facts together. What’s our existing rail situation and what’s our future look like? Because we knew the province was continuing to grow and we needed to make sure we could get our product to market.”

Because of certain regulations in the rail industry and mechanics behind a train’s braking systems, trains are required to use fewer cars in colder temperatures. McLellan said this causes obvious problems because every train car that’s left behind is money that doesn’t go into a producer’s pocket.

The report sets out the following nine recommendations that will be brought to the provincial government for consideration.

The MRE is a limit on the average revenue per tonne that railways can earn on the shipment of regulated grains from Western Canada to the Port of Thunder Bay or to ports in B.C. As 15 years have passed since the MRE was implemented, a full and public review is warranted.

Railways pay nearly $40 million in fuel taxes annually to the Saskatchewan government as a result of a particularly high provincial fuel tax per litre (15 cents per litre). Given the dependence on railways to get products to market, the report said it makes sense to at least bring fuel taxes in line with other provinces.

“The report refers specifically to rail. We’re not on par with other provinces so we think that in a move toward the rail companies to say that this is an important industry, we need you to work with us,” McLellan said.

“We would never want to have a tax in Saskatchewan that’s higher than our competitive neighbours and indeed this one is significantly higher.”

Better and timelier sharing of information can help shippers and railways prepare for disruptions. For example, faster real-time information from the railways to shippers when they become aware that delays will occur will help shippers avoid labour overtime costs.

Saskatchewan and its economy has as direct interest in investments and efficiencies at Port Metro Vancouver, Prince Rupert and Thunder Bay as it does in investments in freight infrastructure within the province. As a result, the Government of Saskatchewan has as much interest in being involved in supporting those investments either directly or indirectly.

For Saskatchewan, a province that is more landlocked than any other, any increased redundancy in terms of routing options to export markets is valuable. Whether this means helping to fund ice-breaking capacity on the Great Lakes and St. Lawrence Seaway or more indirect methods of enabling redundancy, it is a factor that should be considered if export growth continues to be a provincial priority.

Policies such as the order-in-council, which specified the minimum amount of grain to be moved may have unintended consequences. The possibility of such unintended consequences undermining supply chain efficiency should be considered and monitored.

The extent of on farm grain storage is currently unknown, but the need for storage was painfully evident during the 2013-14 crop year. Policy makers should investigate the barriers, financial or otherwise, to investing in more on farm storage in order to determine the value in some solutions.

“Many farmers with expanded crop productions have indeed made significant investments to get their bins increased and you see lots of the white tubes that are storing grain across the province,” McLellan said. “But if it’s not moved appropriately or stored appropriately it can go bad.”

The growing role played by rail in transporting crude oil is largely a result of current pipeline access becoming increasingly constrained. Governments need to make a concentrated effort to work through the political intricacies that have bottlenecked pipeline expansions and determine the impact, if any, on rail service for other commodities.

The grain hopper car fleet in Canada is aging and in need of replacement. Newer cars are both shorter and lighter and as a result contribute to an increase in the carrying capacity of approximately 25 per cent per train. The federal and provincial governments should identify and remove the barriers to new hopper car purchasing, as it relates

See “Rail,” Page 11

to potential ownership by railways, shippers, or third-parties.

“One of the things that is important for Saskatchewan people to recognize is that we need a good solid, sustainable rail and we also know that the rail companies need customers to ship their cargo like we from Saskatchewan do and yet it’s a continuum,” McLellan said.

“There’s a supply chain that’s absolutely critical that it works well, that’s from the farmer right through to the guy that’s working the port in Vancouver. Those people have to be closer in communication and when they do that I think Saskatchewan’s exports will flow much more freely.”

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