WINNIPEG, MANITOBA--(Marketwire - Dec. 11, 2012) - The Western Grain Elevator Association (WGEA) is encouraged by Government action on rail service through Bill C-52 introduced today in the House of Commons.
Grain shippers, the vast majority of whom have single railway access at their locations, have attempted to have rail service issues addressed for over a decade. Grain companies are not able to negotiate balanced agreements for reliable rail service, while railways have the ability to set performance levels for shippers through tariffs. By contrast all other parts of the logistics chain, from producers to grain handlers to vessel owners and processors all face financial consequences when they fail to meet their contractual obligations. Having such a critical part of the logistics chain immune from meaningful service obligations and consequences for failing to meet those obligations is unacceptable.
"We are pleased to see this government now taking action to backstop our ability to negotiate fair and proper service agreements with the railways," said Wade Sobkowich, WGEA Executive Director. "We hope the legislation will be effective in providing service accountability. The effectiveness will become known as Service Level Agreements (SLAs) are finalized and put into effect." Sobkowich added that rail service for grain shipments has generally improved in the recent past, and this legislation will hopefully be effective in backstopping and enhancing the gains that have been made.
The WGEA is particularly encouraged that the government recognizes that long-lasting improvements to rail service cannot occur without a change to the policy environment that allowed poor service to occur in the first place. "Without a legislative backstop, it is nearly impossible for even the largest shippers to negotiate service agreements that reflect what would happen in a competitive marketplace. We are optimistic that this legislation will allow for meaningful commercial negotiations with the railways by providing an arbitration process and legislated penalties," said Sobkowich. "The arbitration process appears to be a binding, cost-effective process that occurs under a reasonable timeline." Sobkowich added that, for grain, the arbitrators will need to be knowledgeable of issues affecting the grain handling industry to ensure that the SLAs and the interpretation of their provisions are effective. Additionally, compensation to shippers for losses resulting from rail service failures will continue to be an area of focus for the WGEA. "We look forward to working with government to make certain this legislation meets its intended goals."
The WGEA is an association of grain businesses operating in Canada, which collectively handle in excess of 90% of western Canada's bulk grain exports. Its members account for approximately 20% of railway revenues and pay annual total rail freight of over one billion dollars.