CEO Doesn’t Want Government to Mess with Canadian National Railway’s Monopoly
The Fair Rail for Grain Farmers Act tabled March 26 by the federal government has stirred a growing debate about the rail transport monopolies in Canada, held by Canadian National Railway and Canadian Pacific Railway (Edmonton Journal, Calgary Herald). The legislation has been introduced in an attempt to help level the playing field between Canadian grain farmers and the 2 rail giants which have been accused of letting grain pile up at elevators across the prairies while hauling more lucrative oil and other dangerous goods shipments.
Transport of a bumper grain crop has been backlogged for months and has seen farmers lose between $2 billion and $3.5 billion in sales so far. As a result, grain farmers lobbied the federal and provincial governments to help address this backlog to prevent further damage to Canada’s agricultural economy. Earlier in March, Transport Canada issued an emergency directive to railways giving them 4 weeks to double their grain shipments to a combined target of 1 million metric tonnes/week or face fines of up to $100,000 per day. The new act extends that directive to August 3, 2014, gives the federal government the power in the future to set minimum grain transport volume requirements, and lets a shipper who is served by only 1 rail company switch its traffic to another railway at a regulated rate under certain conditions.
Some farm groups and provincial governments, including the Alberta government and the Alberta Federation of Agriculture, have applauded the new federal legislation; while others, such as the Saskatchewan government, Alberta Barley and Western Canadian Wheat Growers Association, don’t think the legislation goes far enough. The Saskatchewan government thinks that the penalty payments should be higher and should go to farmers rather than federal coffers, and that minimum volume numbers should be boosted.
Montreal-based CN CEO Claude Mongeau has lashed out at the federal government, calling the legislation unfair and heavy-handed. He has suggested the bill could undermine rail viability and accused the government of unfairly penalizing railways to satisfy the demands of the vocal farming constituency. Several farming group leaders said Mongeau’s comments prove that we need more competition in Canada’s rail industry.
Mongeau is well known for his hyperbolic language whenever he defends the commercial marketplace and CN’s profitability. The fact is, CN’s actions have hurt an important sector of Canada’s economy. Mongeau made similarly exaggerative comments in response to the federal government’s Fair Rail Freight Service Act which was passed last June to level the playing field between freight shippers and the 2 rail giants because rail service had been deteriorating over the years as CN and CP cut operating costs to boost their bottom lines. In short, CN’s and CP’s profits were increasing, while customer service was decreasing, and unfortunately shippers were at the mercy of the 2 rail companies.