No. H 099/07
For release May 30, 2007
OTTAWA — The Honourable Lawrence Cannon, Minister of Transport, Infrastructure and Communities, today tabled amendments to the rail freight provisions of the Canada Transportation Act in the House of Commons.
The proposed amendments would clarify and strengthen the Act's current provisions that protect rail shippers from the potential abuse of market power by railways. The proposed amendments would help address shipper concerns about rail service and rates, while providing regulatory stability to the railways to encourage investments that are required to keep Canadian exporters and importers competitive in international markets.
"I made a commitment that these amendments would be introduced after working with the shippers and the railways to develop possible commercial solutions for resolving disputes," said Minister Cannon. "Today, I am honouring that commitment with a package of amendments that balances the needs of both parties and sets a clear course for our rail transportation system so it is better able to meet the economic challenges of the future."
"I am confident that these proposed amendments will go a long way in addressing the concerns that I have heard from shippers across the country," said the Honourable Chuck Strahl, Minister of Agriculture and Agri-Food and Minister for the Canadian Wheat Board. "Reliable and competitive rail service is essential for our producers to succeed in the global marketplace."
The proposed amendments include:
removing the requirement for the Canadian Transportation Agency (the Agency) to be satisfied that a shipper would suffer substantial commercial harm before it grants a remedy, as it is an unwanted barrier to regulatory remedies;
extending final offer arbitration to groups of shippers on matters relating to rates or conditions for the movement of goods, provided the matter submitted for arbitration is common to all and the shippers make a joint offer that applies to all of them;
allowing for the suspension of any final offer arbitration process, if both parties consent to pursue mediation;
permitting the Agency, upon complaint by a shipper, to investigate charges and conditions for incidental services and those related to the movement of traffic contained in a tariff that are of general application, and to establish new charges or terms and conditions if it finds those in the tariff to be unreasonable;
increasing the notice period for augmentations in rates for the movement of traffic from 20 to 30 days to ensure that shippers receive adequate notice of rate increases;
requiring railways to publish a list of rail sidings available for grain producer car loadings and to give 60 days notice before removing such sidings from operation; and
ensuring that the abandonment and transfer provisions apply to lines that are transferred to provincial short lines (local lines under provincial jurisdiction) and subsequently revert to a federal railway, including the obligation to honour contracts with public passenger service providers.
In addition, the Government of Canada has made a commitment to commence a review of railway service within 30 days after the above amendments to the rail freight provisions of the Canada Transportation Act have been passed. The Government of Canada will consult with the shippers and the railways on the scope and terms of reference for this review. In the interim, shippers continue to have access to the remedies already available in the Act.
"These proposed amendments represent the culmination of extensive consultations and reflect the substantial contributions made by stakeholders from across the country," added Minister Cannon. "I want to applaud both the shippers and the railways for the progress they have made towards developing a commercial dispute resolution mechanism and encourage them to resume these discussions now that these amendments have been tabled."
A backgrounder on the Canada Transportation Act with highlights of the proposed amendments is attached.
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Contacts:
Natalie Sarafian
Press Secretary
Office of the Minister of Transport,
Infrastructure and Communities,
613-991-0700
Cathy Cossaboom
Communications
Transport Canada, Ottawa
613-993-0055
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BACKGROUNDER
CANADA TRANSPORTATION ACT
The Canada Transportation Act came into effect in 1996 and replaced the National Transportation Act, 1987; the Passenger Ticket Act; the Government Railways Act; and elements of the Railway Act.
It modernized and streamlined rail regulation, promoted the formation of short-line railways, ensured that shippers continued to have access to competitive transportation services, eliminated unnecessary regulation in other modes of transport, and placed greater emphasis on commercial decision-making in the transportation sector.
A thorough statutory review of the Act was completed in 2001, and the proposed amendments are the culmination of extensive discussions and consultations that are aimed at updating the legislative framework governing significant components of our national transportation system.
Improvements to the rail freight provisions are the third and final element of the Government of Canada's legislative strategy for amending the Canada Transportation Act. The first, Bill C-3, the International Bridges and Tunnels Act, received Royal Assent on February 1, 2007. The second,
Bill C-11, an Act to amend the Canada Transportation Act and the Railway Safety Act and to make consequential amendments to other Acts, which contains amendments to the general, air and rail passenger provisions, railway noise and the grain revenue cap is currently before the Senate.
Highlights of the Proposed Amendments to the Canada Transportation Act
Rail Disputes: Elimination of Commercial Harm Test
The Canada Transportation Act (CTA) now requires the Canadian Transportation Agency (the Agency) to be satisfied that a shipper would suffer ‘substantial commercial harm' before imposing a regulated remedy for disputes relating to level of service, interswitching rates, and competitive line rates.
Proposed amendment:
The ‘substantial commercial harm' provision is being removed from the CTA since this test focuses on the effect on the shippers rather than on the behaviour of the railways.
Final Offer Arbitration
Final Offer Arbitration (FOA) is a process for resolving disputes between shippers and railways over rates and conditions of service for moving traffic (e.g. hauling railcars from Saskatoon, Sask. to Vancouver, B.C.). Where goods are shipped by rail under a confidential contract, FOA is not available for the matter covered by the contract unless parties agree.
Under the FOA provisions, an independent arbitrator considers the offers made by the shipper and the railway and must select one, which is then implemented for a period of up to one year. The arbitrator may not combine or vary the offers made, and the decision is binding on the parties.
Group FOA, which would allow a number of shippers to apply as a group for an FOA on a matter of common interest, would reduce costs to individual shippers and would also strengthen shippers' leverage in negotiations with the railways.
Proposed amendments:
Implement group FOA for rates and conditions of service for moving traffic, provided the matter submitted for arbitration is common to all, the shippers make a joint offer that applies to all of them, and the Agency is satisfied that mediation has been attempted.
Allow for the suspension of any FOA process, if both parties consent to pursue mediation.
Charges for Incidental Services
Although railways primarily generate revenue from freight rates for the movement of customers' traffic, such as hauling railcars filled with grain from the Prairies to Vancouver, railways also apply charges for activities which are incidental or not directly related to the movement of traffic. These are referred to as incidental or ancillary charges. Examples include demurrage (additional charges to the shipper for taking longer than the permitted time to load or unload a railcar), cleaning and/or storing railcars, and weighing product.
Railway charges have become an issue for shippers in recent years. However, there are limited ways for an individual shipper to address these concerns since final offer arbitration does not apply as a stand-alone remedy to charges and their associated conditions.
Proposed amendments:
The CTA will be amended to permit the Agency, upon complaint by a shipper, to investigate charges and conditions contained in a tariff that are of general application.
The Agency may establish new charges or terms and conditions if it finds those in the tariff to be unreasonable.
This provision will apply to charges and conditions for incidental services and those related to the movement of traffic, except for freight rates.
The Agency will determine the time period for which the new charges and/or conditions shall remain in effect, not to exceed one year.
Notification of Changes to Tariffs
The CTA defines a tariff as “a schedule of rates, charges, terms and conditions applicable to the movement of traffic and incidental services.” The CTA currently requires a railway to publish a notice at least 20 days before it increases a rate in a tariff for the movement of traffic. The notice obligation does not apply to charges for incidental services nor to the terms and conditions related to the tariff item.
Proposed amendment:
The CTA will be amended by increasing the notice period from 20 to 30 days to ensure that shippers receive adequate notice of increases in rates for the movement of traffic.
Producer Car Sidings
During consultations, some stakeholders requested greater control over discontinuance of Prairie rail sidings used for loading grain in producer railcars. Rail sidings are not subject to the transfer and discontinuance provisions of the CTA. Complaints about closing producer railcar sidings stem in part from the shippers' lack of knowledge about which sidings are currently in operation. This situation arises because railways are not obliged at present to inform interested parties which sidings are in service.
Proposed amendment:
The CTA is being amended to require railways to publish a list of sidings available for grain producer railcar loadings and to give a 60-day public notice before removing such sidings from operation.
Leased Railway Lines
Under the CTA, when a federally regulated railway company is no longer interested in operating a rail line, the company can transfer the line to another party for continued operation, whether by sale, lease, or otherwise. In the case of a lease, the railway remains the infrastructure owner although it has no obligations for the operation of the line. This means that when a lease runs out or is terminated, the line reverts back to the owner and is considered an unregulated asset.
Under current legislation, leased railway lines that revert back to owner railways can, in effect, circumvent the discontinuance process in the Act that is intended to offer opportunities to affected communities.
The Government recognizes the importance of shortlines to many communities and local shippers and appreciates the need to preserve these valuable railway lines. For some communities, lease arrangements with shortlines can be the only economically viable way to maintain rail service on very low-traffic lines. Therefore, modifications are required to provide opportunities for other shortline operators to acquire the lines, or for governments to purchase the line.
Proposed amendments:
The CTA is being amended to establish a process that offers communities and shippers a more reasoned approach to discontinuance when leased lines revert back to the owner railway. This process would only apply if the owner railway does not resume service on the line.
Given these conditions, a railway will be required to:
Advertise the line for sale, and if a sale does not take place, offer it to governments at net salvage value before dismantling the line, and
Pay $10,000 per mile annually over three years to the local municipalities if a grain-dependent line is discontinued.
Level of Service Obligations
The level of service provisions of the CTA impose extensive level of service obligations on railways, authorize the Agency to investigate complaints, and provide broad authority for the Agency to order corrective action, if warranted.
No amendments are proposed for these provisions; however, the Government of Canada has made a commitment to conduct a review of railway service to commence within 30 days after the above amendments to the rail freight provisions of the Canada Transportation Act have been passed.
The Government of Canada will consult with the shippers and the railways on the scope and terms of reference for this review.
May 2007
