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Embattled railway boss fires back

Blames winter, record crop for huge grain bottleneck

CN CEO Claude Mongeau says greater supply-chain collaboration is the only solution to the grain backlog.

MIKE DEAL / WINNIPEG FREE PRESS Enlarge Image

CN CEO Claude Mongeau says greater supply-chain collaboration is the only solution to the grain backlog.

Claude Mongeau, the CEO of CN, was in Winnipeg Wednesday with guns blazing, defending his railroad's record during the great Prairie grain bottleneck of 2014.

He argued the perfect storm of the coldest Prairie winter in a century, combined with a record Prairie grain harvest, is what overloaded the system, not poor performance of the railroads.

In a speech to the Winnipeg Chamber of Commerce, Mongeau said it is not fair to single out the railroads when the grain companies are just as responsible for the backlog in grain shipments that is only now starting to lessen with the arrival of milder weather.

But deep-seated antagonisms about historic service levels from both CN and CP meant, for some, those arguments fell on deaf ears.

"Yes, they deserve all the criticism they're getting," said Doug Chorney, president of Keystone Agricultural Producers.

This despite the fact Mongeau said this week the company will hit all-time high levels of grain shipments for this time of the year.

He said the bottleneck is an issue the entire supply chain needs to address.

Among other things, he claims the grain-handling companies are as much to blame because they are signing contracts and ordering rail cars at a rate that far exceeds the system's capacity, including the grain companies' own ability to unload more grain.

"Greater supply-chain collaboration is the only solution, not greater regulation of the railroads," he said.

Mongeau said CN is on target to meet the newly mandated thresholds set by a federal government Order in Council for each of the two national railroads to ship a half-million tonnes of grain per week or face penalties of as much as $100,000 per day.

The Conservative government is also expected to pass legislation by the end of the week that would further regulate the railways. The legislation allows the Canadian Grain Commission to decide how much a grain company will pay to a farmer if the company doesn't meet delivery dates set out in a contract.

It also increases what are called inter-switching limits in Alberta, Manitoba and Saskatchewan, which the federal government says would allow more service by more rail companies.

Mongeau was particularly upset about the latter, claiming it will not enhance the amount of grain moved, because as he said, "We are all sold out."

He said what it could do is encourage poaching from American railroads during times when there is excess capacity available.

"This is legislation done in the heat of the moment, and unfortunately, that's not always the best time to regulate such complex issues," he said.

Brenda Tjaden Lepp, co-founder of FarmLink Marketing Solutions, a producer marketing consultant, said the bitter name-calling going on between the railroads and grain companies represented by the Western Grain Elevator Association and the unprecedented action the government has taken by creating new legislation, is a historic time for the industry.

"This is really a big piece of the transition of the whole grain economy in Western Canada," she said. "You get rid of the Canadian Wheat Board and there are lots of big pieces underneath that are gradually coming to light. It's really history in the making."

She said it flips the old order around to see the grain companies successfully convince the Canadian Transportation Agency to impose legislation on the railroad.

"That is just not how the balance of power normally works," she said.

CN is smarting over the government-imposed regulations, and Mongeau said there should be a level playing field and grain companies should be penalized for overbooking rail cars he claims they do not even have the capacity to unload.

Chorney said the history of poor service from the railroads probably kept companies from ordering more cars.

Tjaden Lepp said, "It is absolutely the truth -- grain companies were over-ordering cars all winter long in order to gain market share."

Premier Greg Selinger also said federal legislation needs to be tougher.

"We think there have to be serious penalties if they're not making grain a top priority," Selinger said. "When this part of Canada opened up, the railway companies were the key to allowing this part of Canada to be the bread basket of the world.

"They still have that obligation."

martin.cash@freepress.mb.ca

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