Vol. 148, No. 26 — December 17, 2014
SOR/2014-276 November 28, 2014
CANADA TRANSPORTATION ACT
Order Specifying the Minimum Amount of Grain to Be Moved, No. 2
P.C. 2014-1297 November 27, 2014
His Excellency the Governor General in Council, on the recommendation of the Minister of Transport and the Minister of Agriculture and Agri-Food, pursuant to subsection 116.2(2) (see footnote a) of the Canada Transportation Act (see footnote b), makes the annexed Order Specifying the Minimum Amount of Grain to Be Moved, No. 2.
ORDER SPECIFYING THE MINIMUM AMOUNT OF GRAIN TO BE MOVED, NO. 2
1. (1) The minimum amount of grain that the Canadian National Railway Company and Canadian Pacific Railway Company must each move during the following periods is specified to be:
- (a) 345 000 t a week for the period that begins on November 30, 2014 and ends on December 20, 2014;
- (b) 200 000 t a week for the period that begins on December 21, 2014 and ends on January 3, 2015;
- (c) 325 000 t a week for the period that begins on January 4, 2015 and ends on February 21, 2015;
- (d) 345 000 t a week for the period that begins on February 22, 2015 and ends on March 21, 2015; and
- (e) 465 000 t for the period that begins on March 22, 2015 and ends on March 28, 2015.
(2) For the purposes of subsection (1), a week begins on Sunday and ends on the following Saturday.
COMING INTO FORCE
2. This Order comes into force on the day on which it is registered.
REGULATORY IMPACT ANALYSIS STATEMENT
(This statement is not part of the Order.)
On May 29, 2014, Bill C-30, An Act to amend the Canada Grain Act and the Canada Transportation Act and to provide for other measures (the Fair Rail for Grain Farmers Act) received royal assent. This legislation, which amended the Canada Transportation Act (CTA) and the Canada Grain Act, aimed to ensure that grain gets to market more quickly and effectively, while maintaining an efficient rail transportation system for all goods. The legislation contained a provision that imposed, for the remainder of the 2013–2014 crop year (i.e. until August 3, 2014), volume requirements for the Canadian National Railway Company (CN) and the Canadian Pacific Railway Company (CP) to each move 500 000 metric tonnes of grain per week. An order in council is required to specify the minimum amount of grain that each company must move during any period within a crop year that begins on or after August 1, 2014.
Beginning in December 2013, extremely cold temperatures affected normal railway operations (i.e. reduced train lengths by up to 30% and limited speed). In addition, western Canada grain farmers produced a record 75.8 million metric tonnes of grain in 2013. The Grain Handling and Transportation System is highly dependent on railways to get product to market, much of which is exported. As a consequence of the reduced railway operations, railway companies (i.e. CN and CP) were not able to fulfill all shippers’ car orders, resulting in a significant backlog of grain and the expectation of a high carry-over into the next crop year. In turn, this translated into lost revenues for producers and damage to Canada’s reputation as a global source of high-quality agricultural products.
On March 7, 2014, the Government adopted an order in council under subsection 47(1) of the CTA, to take immediate effect, setting out minimum volumes of grain that CN and CP were required to move. That order in council also required the railways to provide weekly reports to the Minister of Transport on weekly shipments.
On May 29, 2014, Bill C-30, An Act to amend the Canada Grain Act and the Canada Transportation Act and to provide for other measures (the Fair Rail for Grain Farmers Act) received royal assent. This legislation, which amended the CTA and the Canada Grain Act, aimed to ensure that grain gets to market more quickly and effectively, while maintaining an efficient rail transportation system for all goods. The legislation contained a provision that imposed, for the remainder of the 2013–2014 crop year (i.e. until August 3, 2014), volume requirements for CN and CP to each move 500 000 metric tonnes of grain per week.
On August 1, 2014, the Government enacted an order in council setting out minimum volume requirements for CN and CP at 536 250 metric tonnes a week for the period beginning on August 3, 2014, and ending on November 29, 2014.
While these measures have aided in moving record amounts of grain, the larger than average carry-over of grain (estimated to be 15.4 million metric tonnes going into August 2014) combined with the grain crop yield that is estimated for the coming crop year (56.4 million metric tonnes) will continue to place pressure on the national transportation system and the ability of Canadian grain producers to export their products. As well, more precise rail movements are needed for blending this year due to the non-uniform grades of grain harvested.
To further support the predictability and accountability of the grain supply chain, other actions to complement the new volume requirements proposed for the movement of grain during the winter months will be considered. These actions could include requesting winter contingency plans from CN and CP, as well as plans on how they intend to address the needs of producer car loaders and shortline railways.
This Order is necessary to ensure that minimum grain volume requirements, which are currently in place under the Order Specifying the Minimum Amount of Grain to Be Moved (SOR/2014-189), continue to apply at appropriate levels for the coming winter.
Subsection 116.2(4) of the CTA takes into account that the volume requirements are subject to volume demand and corridor capacity.
The lower minimum volumes reflect winter operating conditions, and should provide CN and CP with the flexibility and capacity to respond to the needs of small shippers, such as producer car loaders, shortline railways, and those shipping grain both domestically and to the United States. The lower levels are aimed at supporting rail service for all corridors. This should enable greater value for the entire grain sector.
This Order states that the minimum amount of grain that CN and CP must each move during the period beginning on November 30, 2014, and ending on March 28, 2015, is specified to be
- 345 000 metric tonnes a week for the period that begins on November 30, 2014, and ends on December 20, 2014;
- 200 000 metric tonnes a week for the period that begins on December 21, 2014, and ends on January 3, 2015;
- 325 000 metric tonnes a week for the period that begins on January 4, 2015, and ends on February 21, 2015;
- 345 000 metric tonnes a week for the period that begins on February 22, 2015, and ends on March 21, 2015; and
- 465 000 metric tonnes for the period that begins on March 22, 2015, and ends on March 28, 2015.
The Order also states that a week begins on Sunday and ends on the following Saturday.
The “One-for-One” Rule does not apply to this proposal, as there is no change in administrative costs to business.
Small business lens
The small business lens does not apply to this proposal, as there are no costs to small business.
The Minister of Transport has been meeting with implicated stakeholders to discuss the problems that have impacted the effective and continued operation of the national transportation system and to discuss possible solutions. Railways have suggested that the proposed volume requirements should take into account a reduction for winter operating conditions. In addition, producer car loaders and shortline railways, as well as those shipping grain domestically and to the United States, have suggested that volume requirements should be set at levels that enable railways to respond to their needs in a timely manner. The Canadian Transportation Agency has also consulted with stakeholders and, as required by the Canada Transportation Act, has provided the Minister of Transport with advice on the minimum amount of grain that CN and CP should move during each month of the crop year.
The total grain supply for the upcoming crop year could be as high as 71.8 million metric tonnes, which includes the estimated 2014–2015 crop production of approximately 56.4 million metric tonnes and carry-over from the 2013–2014 crop year of approximately 15.4 million metric tonnes.
While the railways have moved record volumes of grain since the initial order in council was enacted in March 2014, the combination of a larger than average carry-over and the crop yield for the current crop year may continue to place pressure on the rail transportation system to perform at peak efficiency. Operating at peak efficiency, the carry-over in 2014–15 is expected to be an average size.
As a result, proceeding with this Order would ensure grain is shipped to markets in a reliable and efficient manner and avoid negative impacts that were experienced by many users of the grain transportation system throughout much of the last crop year, including
- lack of storage for new crops;
- reduced cash flows and potential lost revenue for farmers;
- contract penalties, lost sales, and lost premiums incurred by grain companies;
- increased storage costs for farmers and grain companies;
- reduced amounts of grain available for loading at port;
- increased vessel line-ups at west coast ports; and
- substantially reduced supply for domestic use and U.S. destinations.
Not proceeding with this Order would be detrimental to many users of the grain transportation system, and harm Canada’s global reputation as a reliable supplier of grain, recognizing that
- grain exports are shipped to diverse global markets;
- exports of wheat, canola and other crops were valued at $16.15 billion in 2012;
- grain exports to the United States are approximately $1.5 billion per year;
- the canola industry contributes $19 billion annually to the Canadian economy; and
- ocean vessel operators may choose other ports in the United States or Mexico that are more fluid when a large number of vessels are lined up at Canadian ports.
Implementation, enforcement and service standards
The Order comes into force on the day it is registered.
Subsection 177(3) provides that a contravention of subsection 116.2(1) or (4) may be proceeded with as a violation in accordance with sections 179 and 180. The maximum amount payable for each violation is $100,000.
Surface Transportation Policy
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