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Canadian Rail – A Brief History

railblogThis article is meant to provide some background knowledge on the nature of the relationship between Canadian farmers and the two major rail companies in Canada – CP Rail and CN Rail. To stall American interests from accessing the area, a Canadian owned rail line was developed from Alberta to British Columbia through the passage known as the Crowsnest Pass. In order to secure funding with the Canadian government, Canadian Pacific Rail agreed to reduced rates for Canadian farmers shipping grain and related machinery as the farmers were concerned about high freight rates preventing them from competing in international markets.

As the years progressed, this once mutually beneficial agreement started to lose support from the two rail lines as it was no longer cost effective and better returns could be made shipping other cargoes. There have been several revisions made over the years by the federal government in order to reduce the subsidies including the Western Grain Transportation Act which allowed grain shipping costs to increase yearly but not over a maximum of 10%, and more recently the Western Grain Transition Payment Program which further reduced subsidies in lieu of lump sum payment made to ease the transition to higher shipping rates.

Furthermore, service improved in 2014 when Bill C-30 was passed titled the Fair Rail for Grain Farmers Act which required the “Canadian National Railway Company and the Canadian Pacific Railway Company to move the minimum amount of grain specified in the Canada Transportation Act” (S.C. 2014, c.8). Following the ‘sunset’ of Bill C-30 in 2017, grain industry supporters put forward Bill C-49 which addressed two main issues (among others) –

  1. “order the company to compensate any person adversely affected for any expenses that they incurred as a result of the company’s failure to fulfill its service obligations or, if the company is a party to a confidential contract with a shipper that requires the company to pay an amount of compensation for expenses incurred by the shipper as a result of the company’s failure to fulfill its service obligations, order the company to pay that amount to the shipper”
  2. “If the point of origin or destination of a continuous movement of traffic is within a radius of 30 km of an interchange, the Agency may order
  • (a) one of the companies to interswitch the traffic; and
  • (b) the railway companies to provide reasonable facilities for the convenient interswitching of traffic in both directions at an interchange between the lines of either railway and those of other railway companies connecting with them.” (S.C. 2018, C.10).

In conclusion, Canadian farmers/grain companies and the 2 national railways continue to try to find balance between cost and service. Clearly the system is not perfect. The expansive landscape of Canada, combined with the challenging weather, mountain passes, and natural bottlenecks, make for tough logistics. Canada’s agricultural production has increased dramatically in the past 10 to 15 years and is predicted to increase an average of 3% per year. Railways and grain companies continue to find creative contractual ways to handle this demand, such as the Dedicated Train Program by CPR whereby commitments are made for both sourcing of grain (by the grain co’s) and supply of railcars/power (by the railways) in order to create stability and consistency of supply and service.