The federal government tabled long-awaited legislation on Tuesday designed to ensure all shippers are treated fairly by Canada's largest railways.
The Fair Rail Freight Service Act, which was announced in Winnipeg by Transport Minister Denis Lebel and Agriculture Minister Gerry Ritz, was hailed by spokesmen for farmers, grain handlers, oil and gas companies, and pulse-crop growers as an important step forward in levelling the playing field for shippers who have long complained of poor service from the country's major railways -- Canadian National Railway and Canadian Pacific Railway.
"It is definitely a step in the right direction," said Jean-Marc Ruest, vice-president of corporate affairs and general counsel for Canada's largest privately owned grain company -- Winnipeg-based Richardson International.
"It's nice to know there are tools available now to bring railroads to the table and to ensured everyone's interests are respected and that it's a balanced approach," added Keystone Agricultural Producers president Doug Chorney.
The government launched a review in 2008 to address complaints by shippers about Canada's rail freight service. A preliminary report found overall rail freight service was inadequate, in part because of a power imbalance between the country's two large railways and hundreds of shippers. If a railway didn't want to deal with a shipper, there was nothing forcing it to do so.
The new legislation attempts to address that imbalance by guaranteeing shippers the right to negotiate a service agreement with a railway. If an agreement can't be reached within 30 days, they can ask the Canadian Transport Agency to appoint an arbitrator who will impose a binding, non-appealable agreement on the two parties.
The arbitration process will have a 45-day timeline but can be extended for up to 20 days. Railways can face penalties of up to $100,000 for each violation of an arbitrated agreement, as well as other existing remedies provided for in the act.
The proposed legislation is now be reviewed by a parliamentary committee and must be approved by the House of Commons and Senate before becoming law. It's not known how long that process might take.
Lebel told reporters the legislation will enhance the effectiveness, efficiency and reliability of Canada's rail system.
"The railway-shipper relationship is vital to Canada's economy as a whole because when shippers can move more volume this means more exports, more revenue and, for sure, more Canadian jobs," he added.
While shipper groups welcomed the government's intervention, Canadian National was quick to condemn it as an unnecessary intrusion that puts the country's economic growth at risk.
"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," said CN president and chief executive Claude Mongeau.
Mongeau said there is no evidence of systematic rail service performance problems in Canada that warrants Ottawa's intervention.
"The objective fact is that Canada has a world-class rail system, one known internationally for efficiency and reliability -- a key asset for a trading nation like Canada -- and that reflects a well-functioning market for rail services," he said.
Canadian Pacific said the best way to improve the country's "world-class rail supply chain" is through commercial undertakings, better traffic forecasting and more certainty on traffic volumes.
CP Rail CEO Hunter Harrison said the railway has been implementing earlier recommendations, including a service agreement template and a commercial dispute resolution process.
"As such, we are confident strong commercial relationships will continue to emerge with little need for the processes described in the legislation," he stated.
Lebel agreed rail service has improved since the government review began.
He said the new provisions are designed to build upon that success and help solidify the gains that already have been made.
-- with files by Canadian Press