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Canada’s forestry-products industry says poor rail service has cost it $500 million this year, and the capacity crunch will only intensify if more Alberta oil ends up on Canada’s rail lines.
“We’ve had a really difficult year in forest products (because of insufficient) rail service,” Derek Nighbour, CEO of the Forestry Products of Canada Association, told iPolitics. “We lost about $500 million this year based on delays and rail cars not showing up when they’re supposed to.”
This is despite ongoing and “active” conversations with the railways about how to ensure product moves all year round — including through the winter, he says.
“Winter is always a question mark. … Winter comes every year … and we’re kind of holding our breath (and) hoping that we’re not going to see significant deterioration of service and access,” he said, noting that pulp products can’t be stored outside.
Canadian commodities rely on this country’s rail network to get their goods to market, with many sectors captive to only one railway. Nighbour said 80 per cent of Canada’s lumber and pulp mills can only use one railway — Canadian National (CN) or Canadian Pacific (CP), depending on where a mill is located — to get their goods to market.
“We’ve got to get away from this commodity-by-commodity whack-a-mole approach to transportation supply management in Canada,” he said. “We need to be looking at the rail system as a whole, and the infrastructure as a whole, and think about all the commodities that are sharing those rails.”
Canada’s forestry industry in Western Canada used about 185,000 rail cars from January to September. In comparison, the oil and gas sector used about 135,000 cars, he said. “We’re a pretty big player on the rails today.”
Last week, Alberta Premier Rachel Notley told an Ottawa luncheon her province was in negotiations to purchase rail cars. The cars would be used to ship Alberta oil to market as the province grapples with a shortage of pipeline capacity and a deepening price discount.
Alberta wants to buy two unit trains, as well as the locomotive power needed to move those cars, officials told reporters in Ottawa. In a speech to the Toronto Board of Trade, Notley said the province was willing to more than 80 locomotives with each unit train pulling between 100 to 120 cars, reported the Canadian Press.
The province is also cutting oil production in the province. On Sunday, Notley announced Alberta would cut oil production in the province by 8.7 per cent starting Jan. 1.
Adding so many trains to the network, Nighbour said, will almost certainly displace other product because Canada’s rail network is already operating at capacity.
“It would be disastrous,” he said, since there’s already a shortage of locomotives and crews along the network. “Adding more cars is just going to gum up the system, and without the locomotives and the staff … you’re not going to be moving anything.”
Canada’s forestry industry isn’t alone in its dependence on trains. Shippers of commodities, especially grain, have been hit with two severe rail-service backlogs in the past five years.
The 2013-14 grain backlog is estimated to have cost the Western Canadian economy more than $8 billion. Last year, many Prairie farmers were left financially strapped after millions of tonnes of prairie grain was left stranded across Western Canada for weeks.
The backlog was blamed on a combination of poor weather, a shortage of locomotive power and crews, and inaccurate demand forecasts.
In an effort to build up its fleet, CN ordered 200 locomotives in December 2017 from American-based manufacturer GE Transportation. The rail company added another 60 locomotives to that order in September 2018. CN says growth in North American rail traffic is up 3.5 per cent from 2017.
The 2017-2018 grain backlog also forced the Trudeau government to make adjustments to Bill C-49, the Transportation Modernization Act, which took effect in June. The new legislation requires Canada’s major railways, CN and CP, to provide detailed winter-movement plans for goods like grain.
Nighbour said Thursday it was too early to say whether C-49 was enough to deal with Canada’s rail crunch.
In September, Transport Minister Marc Garneau and Agriculture Minister Lawrence MacAulay met with stakeholders from Canada’s grain industry in Saskatoon to discuss this year’s transportation of grain.
In an update to the House of Commons agriculture committee in late November, both CN and CP said this year’s grain-shipping season was off to a solid start.
This article first appeared on ipolitics.ca
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