FROM THE MARCH 07 ISSUE OF MADISON’S LUMBER REPORTER:
Canada’s prairie grain farmers have been watching the quality and value of their crops decline over the last few months in fields or in storage due to a rail transportation bottleneck.
The situation got so dire this week in Vancouver, BC, that Federal Minister of Transport Lisa Raitt appointed uber-mediator Vince Ready Thursday morning to avert a total walkout by truckers at Port Metro Vancouver. Early afternoon Thursday Port Metro Vancouver released, “Ready will conduct an independent review directed at resolving issues that have contributed to recent protests by local truckers.”
The nation’s largest railways have taken the economy “hostage”, says Agriculture Minister Gerry Ritz, according to Blacklock’s Reporter February 26. His remarks followed farm and industry protests of inexplicable shipping delays despite passage of the Fair Rail Freight Service Act: “We are considering all options”.
The law, passed last year, was designed to improve service for railway customers but has delivered no noticeable benefits for Canada’s agricultural shippers, says an executive with the Western Grain Elevators Association. That’s because no major grain companies have attempted to negotiate service agreements with Canada’s major railway companies since the Fair Rail Freight Service Act was passed by Parliament in June 2013, said WGEA executive director Wade Sokbowich to the Western Producer February 7.
“There have been no service level agreements that have been negotiated to my understanding nor have there been any service level agreements arbitrated by the Canadian Transport Agency,” Sobkowich said. “Our confidence in the ability of a shipper to successfully get a service level agreement with teeth is very low.”
The Fair Rail Freight Service Act was passed last June after a lengthy process aimed at improving rail service for shippers.
Please see the October 26, 2012 issue of your Madison’s Lumber Reporter for details on the establishment of the Fair Rail Freight Service Act.
Rail Transport Woes
Grain Growers of Canada is urging producers across the country to join forces in lobbying their members of Parliament for changes to the broken grain transportation system.
The group is urging farmers to call their MP and talk about “the rail service issues that are personally affecting you and your farm.”
“This is certainly a serious situation for farmers, and we have to get that message out there,” said Acme grain producer and Grain Growers vice-president Matt Sawyer.
Canada’s forest products’ industry has suffered an ongoing season of brutal rail service. Extended extreme bad weather in key delivery markets is partially responsible for the lack of rail cars, but the truth is the oil and gas industry is paying significantly more to move much more volume.
California, the third-biggest refining state in the US, is about to see a flood of oil by rail from places such as Canada and North Dakota as suppliers seek to tap a market isolated from the rest of the country, said Bloomberg February 26.
The western US may bring 500,000 barrels per day of light oil by rail in 2015 as the region’s refiners seek to replace shrinking output in California and Alaska and more costly foreign imports, Mark Smith, Tesoro Corp. (TSO)’s vice president of development, supply, and logistics, said at a conference in Glendale, CA, in February. California refineries can run 1.63 million barrels a day, the most in the US after Texas and Louisiana, government data show.
The state is already bringing in record volumes of oil from Canada by rail, totalling 709,014 barrels in December and comprising 67 per cent of rail receipts, the Energy Commission’s website shows. Total oil-by-rail volumes to California, the most populous US state, from all sources surged in the fourth quarter to a record 2.83 million, almost double the amount from the three months prior.
West Coast rail terminals can unload 210,000 barrels a day, Smith said to Bloomberg, and almost all the refineries in Washington state have their own offloading complexes.
Operators in sectors like agriculture, and forest products specifically, are getting squeezed as rail lines and engines are increasingly diverted to the much more lucrative — for the railroads — oil and gas shippers.
Malcolm Cairns, a transportation consultant in Brighton, ON, and a former director of business research at Canadian Pacific Railway, released a research paper last year that Canada’s two largest railroads, CP and Canadian National Railway, could move a combined 600,000 to 800,000 barrels of Canadian crude a day within two years. That approaches Keystone XL’s proposed capacity of 830,000 barrels a day.
Both railroads reach the Gulf Coast, where 45 per cent of US refinery capacity is located, either directly or via connecting rail lines. They also can haul the oil to East Coast refineries and barge terminals, and they are doing that now.
However, the growth of western Canadian oil production is projected to outstrip rail capacity by a long shot, according to Cairns. The tar sands region in Alberta and Saskatchewan could produce an additional 3 million barrels a day by 2035.
Cairns predicts that rail will provide a “niche service” once more pipelines are built. And if the U.S. doesn’t build them, Canada will.
The report is available on the Canadian Transportation Research Forum website: http://www.ctrf.ca/conferences/2013Halifax/Cairns2013CTRFPresentation.pdf
For its part, Burlington Northern Santa Fe has ramped up its operations dramatically, now moving 600,000 barrels of oil per day (once refined, that’s enough to fill the gas tanks of 1.35 million cars), more than ten times the amount moved in 2010.
As for that rail service act, apart from the exclamations by various industries, there isn’t a single update about progress or action on this important subject.
In an editorial March 4, the Nanton News, out of Nanton, AB, stated “Canada’s railway network is a federal responsibility. Alberta is fully supportive of the federal government introducing legislative changes that would make the system more accountable through direct and immediate penalties for whichever part of the system is responsible for the backlog, including inadequate rail service.
While this year’s bumper harvest was exceptional, it has exposed some weaknesses in Canada’s grain-handling transportation system that must be fixed.”