Vol. 150, No. 9 — May 4, 2016

Registration

SOR/2016-77 April 19, 2016

FAIR RAIL FOR GRAIN FARMERS ACT

Order Establishing the Text of a Resolution Providing for the Postponement of the Coming into Force of Subsections 5.1(2), 6(2), 7(2), 8(2), 9(2), 10(2), 11(2) and 12(2) of the Fair Rail for Grain Farmers Act

P.C. 2016-253 April 19, 2016

His Excellency the Governor General in Council, on the recommendation of the Minister of Transport, pursuant to subsection 15(2) of the Fair Rail for Grain Farmers Act (see footnote a), makes the annexed Order Establishing the Text of a Resolution Providing for the Postponement of the Coming into Force of Subsections 5.1(2), 6(2), 7(2), 8(2), 9(2), 10(2), 11(2) and 12(2) of the Fair Rail for Grain Farmers Act.

Order Establishing the Text of a Resolution Providing for the Postponement of the Coming into Force of Subsections 5.1(2), 6(2), 7(2), 8(2), 9(2), 10(2), 11(2) and 12(2) of the Fair Rail for Grain Farmers Act

Text of the Resolution

1 For the purposes of subsection 15(1) of the Fair Rail for Grain Farmers Act, the text of the resolution set out in the schedule is established.

Coming into force

2 This Order comes into force on the day on which it is registered.

SCHEDULE
(Section 1)

Text of the Resolution

That, pursuant to subsection 15(1) of the Fair Rail for Grain Farmers Act, the coming into force of subsections 5.1(2), 6(2), 7(2), 8(2), 9(2), 10(2), 11(2) and 12(2) of that Act on August 1, 2016 be postponed for a period of one year.

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Order.)

Issues

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, was introduced to deal with a record grain crop and severe weather, which led to a backlog of grain shipments.

The amendments to the CTA came into force on August 1, 2014, and will be repealed on August 1, 2016, unless a resolution to extend them is adopted in both Houses of Parliament.

Background

To address the backlog of grain shipments that emerged during the winter of 2013–2014 due to a record-sized grain crop and extreme cold conditions that significantly impeded the ability of the railway companies to move grain, the Government enacted the Fair Rail for Grain Farmers Act in May 2014, which, in part, amended the CTA to add a number of provisions.

The amendments came into force on August 1, 2014. However, given the temporary nature of the grain backlog and the potential to distort the overall freight rail system in Canada, some amendments were deliberately made temporary in the legislation.

These provisions amended the CTA by

Concurrent with the introduction of these measures, the Government also announced its intention to examine grain supply chain issues more fully in the context of the statutory review of the CTA (the CTA Review), which was accelerated by one year with a mandate to give priority consideration to the grain handling and transportation system.

Objectives

This Order of the Governor in Council establishes the text of a resolution, which, if passed by both Houses of Parliament, will extend the provisions of the Fair Rail for Grain Farmers Act, that are set to expire on August 1, 2016, for an additional year.

This will allow the Government to develop a comprehensive approach to the freight rail transportation system for all commodities, including grain, in the context of the Government’s response to the CTA Review and to determine whether provisions of the Fair Rail for Grain Farmers Act, summarized above, should be included in the approach.

Description

This Order of the Governor in Council establishes the text of a resolution which, if passed by both Houses of Parliament, would have the effect of postponing, for one year, the coming into force of provisions that repeal or reverse the amendments to the CTA, summarized above, that were enacted by the Fair Rail for Grain Farmers Act.

Specifically, the coming into force of the following subsections of the Fair Rail for Grain Farmers Act would be postponed: 5.1(2), 6(2), 7(2), 8(2), 9(2), 10(2), 11(2) and 12(2).

“One-for-One” Rule

The “One-for-One” Rule does not apply to this proposal, as there is no new administrative burden on business, and the extension of these measures is proposed for a period of one year.

Small business lens

The small business lens does not apply to this proposal, as there are no costs on small business.

Consultation

Stakeholder views on the future of the Fair Rail for Grain Farmers Act are well known and have been formally expressed through submissions to the CTA Review or through communications with the Minister of Transport, the Minister of Agriculture and Agri-Food and departmental officials.

Grain shippers and producers support the retention of all these provisions, with particular emphasis on the retention of the extended interswitching distances at 160 km. Grain shippers and producers view these provisions, especially the extended interswitching limits, as instruments that act as leverage in their commercial negotiations so that they can seek better service levels and more competitive freight rate offerings from the railway companies.

Other commodity shippers feel that these provisions were developed specifically to deal with a grain transportation issue without taking into account the impact of these measures on the overall system or the potential for negative impacts on other commodity shipments. At least one commodity shipper noted that the extended interswitching limits could have the potential to reduce railway companies incentives to invest in expanding capacity.

In general, non-grain shippers are of the view that these measures need to be considered in the context of the overall freight rail system.

Railway companies are generally opposed to any extension of these measures, as they believe they were implemented to address a time-limited supply chain event, and that they were made without considering the consequential impacts on commercial relationships across the supply chains. Furthermore, railway companies claim these provisions make their networks less efficient and create a structural unfairness with respect to U.S. railway companies, which are able to solicit traffic in Canada through this provision, while no such reciprocal regulatory instruments are available to Canadian railway companies in the U.S.

Rationale

An order of the Governor in Council to establish the text of a resolution, to be tabled in Parliament, is necessary to extend the provisions of the Fair Rail for Grain Farmers Act, which will expire on August 1, 2016.

This extension would allow the Government to consider the complex policy issues in the grain handling and transportation system in the context of the Government’s response to the CTA Review. The CTA Review Report, among other things, recommends that the extended interswitching distances of 160 km be allowed to sunset. This recommendation and others need to be considered in a comprehensive way to ensure that the right policy and regulatory framework is in place to support the efficient operation of the overall freight rail system, including the grain handling and transportation system.

The impact of leaving these provisions in place for an additional year should not place an undue burden on any supply chain participants, as there is evidence that they have only been used on a limited basis.

While these provisions have not been broadly used, proceeding with this Order will provide the Government — and shippers — with the ability to access and use any of the provisions and associated shipper remedies, if necessary, in the interim period while the Government examines the rail freight system in more depth.

Extending these measures will provide regulatory certainty under the existing policy framework that has been in place over the past two crop years, which is familiar to supply chain participants, and will allow for transportation planning for the 2016–2017 grain shipping year, which starts on August 1, 2016.

While these temporary provisions were initially put in place to respond to a specific supply chain challenge during the 2013–2014 crop year, a number of stakeholders have come to view these provisions as a suite of commercial tools they would like to see continued. Leaving these provisions in place for an additional year will allows the Government to assess their impact on the various elements of the supply chain, particularly now that the grain supply chain has returned to normal operations.

Contact

Lenore Duff
Director General
Surface Transportation Policy
Place de Ville, Tower C, 27th Floor
330 Sparks Street
Ottawa, Ontario
K1A 0N5
Telephone: 613-998-2689
Fax: 613-998-2686
Email: lenore.duff@tc.gc.ca