Vol. 148, No. 17 — August 13, 2014
SOR/2014-189 August 1, 2014
CANADA TRANSPORTATION ACT
Order Specifying the Minimum Amount of Grain to Be Moved
P.C. 2014-892 July 31, 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.
ORDER SPECIFYING THE MINIMUM AMOUNT OF GRAIN TO BE MOVED
1. (1) The minimum amount of grain that the Canadian National Railway Company and the Canadian Pacific Railway Company must each move during the period that begins on August 3, 2014 and ends on November 29, 2014 is specified to be 536 250 t a week.
(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 imposes, 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 and winter conditions 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 of 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 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 possible 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 are each 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 imposes, 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.
The railways have consistently met or exceeded this requirement on a weekly basis. While these measures have aided in moving record amounts of grain, the large expected carry-over of grain (estimated to be 17 million metric tonnes going into August 2014) and the higher than average grain crop yield that is estimated for the coming crop year (in excess of 60 million metric tonnes) will continue to place pressure on the national transportation system and the ability of Canadian grain to access markets in Canada and beyond.
This Order is necessary to ensure that minimum grain volume requirements, which are currently in place under the Fair Rail for Grain Farmers Act, and were previously under an order in council enacted in March 2014 pursuant to subsection 47(1) of the CTA, continue to apply. This Order requires that each railway move 536 250 metric tonnes of grain per week until the end of November 2014. The Government has stated it wishes to stabilize the sector while discussions with stakeholders continue on building a transportation system that has greater capacity, predictability and accountability for the industry. Subsection 116.2(4) of the CTA takes into account that the volume requirements are subject to volume demand and corridor capacity. CN and CP are also encouraged to consider, among other things, the needs of producer car loaders and short-line railways in moving the minimum amount of grain specified in this Order.
This Order states that the minimum amount of grain that CN and CP must each move is specified to be 536 250 metric tonnes a week for the period beginning on August 3, 2014, and ending on November 29, 2014.
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 on 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 not exceed the volume requirements established under the Fair Rail for Grain Farmers Act, and take into account a reduction for winter operating conditions. In addition, the Canadian Transportation Agency has also consulted with stakeholders and, as required by recent amendments to 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.
In order to take into account variability in operating conditions throughout the year, and with a view to moving approximately 52 metric million tonnes for the 2014–2015 crop year, in the first months of the next crop year it is being recommended that the minimum amount of grain that must be moved by each of the railways would be as follows:
- — August 3, 2014, to November 29, 2014: 536 250 metric tonnes a week.
This figure accounts for what is anticipated may be mandated for the remainder of the 2014–2015 crop year, should additional volume requirements be needed.
The following potential volume requirements would take into consideration weather and other factors, and could be in the range of (in metric tonnes, per railway):
- — December: approximately 430 000 per week;
- — January to February: approximately 400 000 per week;
- — March: approximately 455 000 per week; and
- — April to the end of the crop year: approximately 536 250 per week.
Actual minimum movement volumes would need to be set by a new order in council and would be based on additional monitoring of the situation over the next four months.
The total grain supply for the upcoming crop year could be as high as 80 million metric tonnes, which includes the estimated 2014–2015 crop production of approximately 60 million metric tonnes and carry-over from the current crop year of approximately 17 million metric tonnes. Therefore, 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 national transportation system throughout much of this 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, including negative impacts on domestic producers of grain dependent products, due to reduced inventories of wheat.
Not proceeding with this Order would be detrimental to many users of the national transportation system, and harm Canada’s global reputation for reliable transportation, recognizing that
- — farmers may not be able to fully exploit higher prices in the months following harvest (when prices are at their highest);
- — grain exports are shipped to diverse global markets, including 11.8 million metric tonnes to markets in Asia, 3.1 million metric tonnes to the Middle East and 1.56 million metric tonnes to Europe;
- — 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.
Section 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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