Amended Canada Transportation Act receives royal assent
Source: Minister of Transport
Published: February 29th 2008

OTTAWA — The Honourable Lawrence Cannon, Minister of Transport, Infrastructure and Communities, today announced that Bill C-8, Act to Amend the Canada Transportation Act (railway transportation), has received Royal Assent.

The Bill consists of amendments to clarify and strengthen the Act's provisions that protect rail shippers from the potential abuse of market power by railways. The amendments will help address shipper concerns about rail service and rates, while providing regulatory stability to the railways to encourage investments that are required to keep Canadian exporters and importers competitive in international markets.

"This government managed to get Bill C-8 passed in one of the smallest minority governments in history, something that the last majority government could not do," said Minister Cannon. "Bill C-8 proves that this government can get things done and deliver real results for Canadians."

"Canadian farmers depend on railways to ship their products to the world," said the Honourable Gerry Ritz, Minister of Agriculture and Agri-Food and Minister for the Canadian Wheat Board. "This government is taking real action to outline clear rights and responsibilities as railways and farmers work together."

The amendments include:

"These amendments represent the culmination of extensive consultations and reflect the substantial contributions made by stakeholders from across the country," said Minister Cannon. "The amendments balance the needs of both parties and set a clear course for our rail transportation system to meet the economic challenges of the future."

In addition, the Government of Canada had committed to commence a review of railway service within 30 days of the Bill receiving Royal Assent. The Government of Canada has been consulting with the shippers and the railways on the scope and terms of reference for this review. Details of the review will be announced in the coming weeks. In the interim, shippers continue to have access to the remedies already available in the Act.

A backgrounder on the Canada Transportation Act with highlights of the amendments is attached.


BACKGROUNDER

CANADA TRANSPORTATION ACT

The Canada Transportation Act came into effect in 1996 and replaced the National Transportation Act, 1987; the Passenger Ticket Act; the Government Railways Act; and elements of the Railway Act.

It modernized and streamlined rail regulations, promoted the formation of short-line railways, ensured that shippers continued to have access to competitive transportation services, eliminated unnecessary regulations in other modes of transport, and placed greater emphasis on commercial decision-making in the transportation sector.

A thorough statutory review of the Act was completed in 2001, and the amendments are the culmination of extensive discussions and consultations that are aimed at updating the legislative framework governing significant components of our national transportation system.

Improvements to the rail freight provisions are the third and final element of the Government of Canada's legislative strategy for amending the Canada Transportation Act. The first, Bill C-3, the International Bridges and Tunnels Act, received Royal Assent on February 1, 2007. The second, Bill C-11, an Act to amend the Canada Transportation Act and the Railway Safety Act and to make consequential amendments to other Acts, which contains amendments to the general, air and rail passenger provisions, railway noise and the grain revenue cap received Royal Assent on June 22, 2007.

Highlights of the Amendments to the Canada Transportation Act

Rail Disputes: Elimination of Commercial Harm Test

The Canada Transportation Act (CTA) previously required the Canadian Transportation Agency (the Agency) to be satisfied that a shipper would suffer ‘substantial commercial harm' before imposing a regulated remedy for disputes relating to level of service, interswitching rates, and competitive line rates.

Amendment:
The ‘substantial commercial harm' provision has been removed from the CTA since this test focuses on the effect on the shippers rather than on the behaviour of the railways.

Final Offer Arbitration

Final Offer Arbitration (FOA) is a process for resolving disputes between shippers and railways over rates and conditions of service for moving traffic (e.g. hauling railcars from Saskatoon, Sask. to Vancouver, B.C.). Where goods are shipped by rail under a confidential contract, FOA is not available for the matter covered by the contract unless parties agree.

Under the FOA provisions, an independent arbitrator considers the offers made by the shipper and the railway and must select one, which is then implemented for a period of up to one year. The arbitrator may not combine or vary the offers made, and the decision is binding on the parties.

Group FOA, which will allow a number of shippers to apply as a group for an FOA on a matter of common interest, will reduce costs to individual shippers and will also strengthen shippers' leverage in negotiations with the railways.

Amendments:
Implement group FOA for rates and conditions of service for moving traffic, provided the matter submitted for arbitration is common to all, the shippers make a joint offer that applies to all of them, and the Agency is satisfied that mediation has been attempted.

Allow for the suspension of any FOA process, if both parties consent to pursue mediation.

Charges for Incidental Services

Although railways primarily generate revenue from freight rates for the movement of customers' traffic, such as hauling railcars filled with grain from the Prairies to Vancouver, railways also apply charges for activities which are incidental or not directly related to the movement of traffic. These are referred to as incidental or ancillary charges.

Examples include demurrage (additional charges to the shipper for taking longer than the permitted time to load or unload a railcar), cleaning and/or storing railcars, and weighing product.

Railway charges have become an issue for shippers in recent years. However, there are limited ways for an individual shipper to address these concerns since final offer arbitration does not apply as a stand-alone remedy to charges and their associated conditions.

Amendments:
The CTA is amended to permit the Agency, upon complaint by a shipper, to investigate charges and conditions contained in a tariff that are of general application.

The Agency may establish new charges or terms and conditions if it finds those in the tariff to be unreasonable.

This provision applies to charges and conditions for incidental services and those related to the movement of traffic, except for freight rates.

The Agency will determine the time period for which the new charges and/or conditions shall remain in effect, not to exceed one year.

Notification of Changes to Tariffs

The CTA defines a tariff as "a schedule of rates, charges, terms and conditions applicable to the movement of traffic and incidental services." The CTA previously required a railway to publish a notice at least 20 days before it increases a rate in a tariff for the movement of traffic. The notice obligation does not apply to charges for incidental services nor to the terms and conditions related to the tariff item.

Amendment:
The CTA is amended by increasing the notice period from 20 to 30 days to ensure that shippers receive adequate notice of increases in rates for the movement of traffic.

Producer Car Sidings

During consultations, some stakeholders requested greater control over discontinuance of Prairie rail sidings used for loading grain in producer railcars. Rail sidings are not subject to the transfer and discontinuance provisions of the CTA. Complaints about closing producer railcar sidings stem in part from the shippers' lack of knowledge about which sidings are currently in operation. This situation arises because railways were previously not obliged to inform interested parties which sidings are in service.

Amendment:
The CTA is amended to require railways to publish a list of sidings available for grain producer railcar loadings and to give a 60-day public notice before removing such sidings from operation.

Leased Railway Lines

Under the CTA, when a federally regulated railway company is no longer interested in operating a rail line, the company can transfer the line to another party for continued operation, whether by sale, lease, or otherwise. In the case of a lease, the railway remains the infrastructure owner although it has no obligations for the operation of the line. This means that when a lease runs out or is terminated, the line reverts back to the owner and is considered an unregulated asset.

Under previous legislation, leased railway lines that reverted back to owner railways could, in effect, circumvent the discontinuance process in the Act that is intended to offer opportunities to affected communities.

The Government recognizes the importance of shortlines to many communities and local shippers and appreciates the need to preserve these valuable railway lines. For some communities, lease arrangements with shortlines can be the only economically viable way to maintain rail service on very low-traffic lines. Therefore, modifications were required to provide opportunities for other shortline operators to acquire the lines, or for governments to purchase the line.

Amendments:
The CTA is amended to establish a process that offers communities and shippers a more reasoned approach to discontinuance when leased lines revert back to the owner railway.

This process will only apply if the owner railway does not resume service on the line.

Given these conditions, a railway is required to:

Level of Service Obligations

The level of service provisions currently in the CTA impose extensive level of service obligations on railways, authorize the Agency to investigate complaints, and provide broad authority for the Agency to order corrective action, if warranted.

No amendments were proposed for these provisions; however, the Government of Canada has made a commitment to conduct a review of railway service to commence within 30 days of the Bill receiving Royal Assent.

The Government of Canada is consulting with the shippers and the railways on the scope and terms of reference for this review. Details of the review will be announced in the coming weeks.