Railway execs decry push for regulations

The reactions from Canadian National Railway and Canadian Pacific Railway to the preliminary findings of the Rail Freight Service Review were respectful yet firm: Neither of Canada’s two major railways wants to see the government impose any new regulations.

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Here were the main points the railways’ executives made in the responses they sent to Transport Canada in an effort to sway the panel before the final review.

Michael Murphy, vice president of government affairs, Canadian Pacific:

“At the onset I would like to state that Canadian Pacific supports the Government’s and the Panel’s goal of improving the overall performance of Canada’s rail freight supply chain. …

“I also firmly agree with the Panel’s assertion that commercial approaches are vastly superior to additional regulation in providing market-based incentives for parties to work together. …

“CP does believe that commercial principles coupled with a stable regulatory regime are the best approaches to promote rail freight supply chain coordination and investment. … CP also submits that a key regulatory measure, as presented by the Panel, of mandated service agreements backstopped by final offer arbitration puts an undue focus on the railway component of the rail freight supply chain … It is an impractical recommendation.

“As we have discussed with you on several occasions, the root cause of service ‘failures’ (attributed to the railways) in fact is often the result of issues at ports, such as weather, labour disputes and vessel arrival delays, demand bunching/peaks, inaccurate forecasting or lack of visibility in supply chain demand. Additional government regulation cannot effectively deal with these ongoing real life issues.”

Claude Mongeau, president and CEO, Canadian National:

“A genuine supply chain review by the Panel would have allowed all participants in the logistics chain an opportunity to comment on the role and services of other key participants. The Panel’s focus on railways alone allowed participants to comment only on the rail segment of the chain. This represents a major shortcoming, as it provide a partial and incomplete view of issues and opportunities in Canada’s supply chains. It is clear that supply chain issues simply cannot all be resolved through the single regulated rail component of the chain. …

“The fact is that, in the Panel’s review, the railways were treated differently than other participants in the supply chain. For example, the presence of two railway service providers is considered a situation of ‘dual monopoly’ but that of two non-rail service providers in other segments of the logistics chain is not considered to raise a market structure issue. …

“…[W]e wish to express serious concerns with the Panel’s advanced legislative drafting approach. To proceed with advanced drafting of complex regulation is not only unusual, it would fail to take into account the extensive initiatives already taken and committed by the railways. More critically, it will create a disincentive, not only for the continued meaningful discussions, but also for commercial solutions, undermining the Panel’s own stated preference for such solutions in the first place.”