Canadian Railways Traffic Mix
In 1966, Gordon Lightfoot was commissioned by the CBC to write a song for a special broadcast celebrating Canada’s upcoming centennial. He wrote Canadian Railroad Trilogy. One of Lightfoot’s most popular songs, it describes the optimism of the railroad age during Canada’s early history. The song highlights the toil and sweat that it took the “navvies”—railroad workers—to construct such an immense public works project. According to Lightfoot, Pierre Berton once told him that Canadian Railroad Trilogy said as much on the topic as his famous books The National Dream and The Last Spike. No doubt Berton was humouring him, but it was well deserved nonetheless. What is important is that these great works exist because they serve as reminders to an incredible part of our history.
The national railroad was an incredible vision from Prime Minister John A. MacDonald. It helped create a country and entrenched a trading network that would ensure its economic health and viability. This network serves as the backbone for Canada’s diverse economy. Today, Canada’s freight railway industry moves more than $280 billion worth of goods from coast to coast.1 In 2016, it transported over 338 million tonnes of freight.2
Rail shipping has been highly scrutinized in Saskatchewan in recent years for failing to effectively get agriculture shipments to market. Record crop yields and bad weather have presented major obstacles for rail shippers, and farmers have been left sitting on product. As the two major rail companies, Canadian National (CN) and Canadian Pacific (CP) have been strongly criticized for the backlogs with CN taking the brunt of it.
In response, CN pledged $210 million to expand and strengthen Saskatchewan’s rail infrastructure.4 Their program includes multiple track projects to boost rail capacity and improve network resiliency across the Prairies. “We are investing for the long haul with these projects to boost capacity and network resiliency,” said Doug Ryhorchuk, vice-president of CN’s Western Region in June 2018. “Our investments in new double track across the Prairies combined with new equipment and more people will help us deliver superior service to our grain, energy and other customers across the province and North America.”5
Industry West spoke to Paul Sinclair, associate professor in the University of Regina’s Faculty of Business Administration about this issue. He points out that rail shipping is suffering from a lack of synergy amongst key stakeholders as well as an absence of hard data that could improve the sector’s overall performance. Sinclair states, “Maritime shipping companies, railways, port authorities, transloaders, and trucking firms do not divulge container data crucial to making the whole system work. Government agencies have not bothered to ask them for it.” So, the result is a lack of predictability. Within a sector with so many moving parts, mistakes happen and it is almost always the exporters that suffer.
To this point, Sinclair laments the downfall of Regina’s Global Transportation Hub (GTH). In an August 2018 CBC story, Sinclair wrote, “According to the news-media version of the infamous land deal at the Global Transportation Hub, taxpayers lost as much as $14 million to opportunistic land developers. In reality, the cost of the scandal could be in the billions — and the real victims are farmers.”6 It is very difficult for someone to dispute the value of the GTH if they truly understood what it was offering, its strategic trade purposes, and its importance for developing agriculture commodities. This cannot act as a barrier to its future success though. Intermodal facilities are key to the province’s trading success.
“A successful intermodal hub would give farmers 40 cash crops, not two or three,” says Sinclair. “A cluster of processors at the GTH expelling, extruding, compacting, pelletizing, isolating, filtering, sorting and testing raw agricultural commodities would create high-value products and by-by-products, some of which don’t currently exist.”7
In 2015, the Conference Board of Canada produced a report titled, Saskatchewan’s Export Potential: The Impact of Rail Access. Its major conclusion, not surprisingly, was that Saskatchewan will remain heavily dependent on rail infrastructure into the foreseeable future. It also stressed the importance of private companies and governments cooperating in order to facilitate this supply chain infrastructure. Specific recommendations included:
- reducing the cost of shipping by rail to and from the province
- encouraging greater and timelier communication across the logistics supply chain
- increasing coordination with governments and infrastructure providers outside of the province
- increasing supply chain options and redundancy
- considering the full effects of legislative solutions while focusing efforts on long-term rather than short-term solutions
- determining the current capacity and the “Right Size” of on-farm storage
- determining the impact of pipeline expansion opportunities8
Considering that this was written in 2015, it is discouraging that these reasonable recommendations have never been undertaken. But, the point of this article is not to point fingers and find blame; it is to establish the complexity of our current trading deficits. Saskatchewan’s economy is diversifying and producers want to maximize the value of their yields.
Infrastructure is an issue for every country, but it is especially necessary for such a vast country as Canada with its productive interior. It’s made more difficult when sectors compete for it. Oil is the most lucrative resource being shipped out of the province. As such, one of the concerns is that rail shows a preference to shipping it over other agriculture commodities. However, this point is refuted by CN’s director of marketing for grain, David Przednowek, said in August 2018 that the idea that oil is to blame for reduced grain movement is “one of the biggest misperceptions out there”, because oil only represents one per cent of CN’s book of business.9 That being said, a report done by the International Energy Agency (IEA) predicts oil shipments in Canada will average 250,000 barrels per day in 2018 and will climb to 390,000 barrels per day in 2019.10 That is a lot of oil! So, it’s understandable that there are concerns over the rail industry’s ability to move agriculture commodities to market. Too bad we didn’t have more pipeline capacity in this country to move our oil and offset the current demands on our existing infrastructure…
Unfortunately, we seem to be living in a time of disunity in this country. So much political rhetoric is driving public debate, and interfering with the processes that need to happen in order to address our infrastructure deficits. The more politicized an issue becomes, the unlikelier it is to be easily resolved. An interesting example of this has recently been unearthed by a Vancouver-based journalist, Vivian Krause and picked up by the CBC days ago. By investigating tax data of Canadian environmental groups, Krause discovered that millions of dollars of contributions were originating from wealthy American lobbying groups. It is a concerning revelation attracting national attention, and indicates that there are serious interests in the United States that do not want to see Canadian oil going to market.
There are forces from outside of our country and from within that present major obstacles to Canada’s development. Hopefully we can continue to be innovative, adaptable, and focus on the foundations that will ensure economic sustainability in the country for years to come. This was likely the mindset of the individuals who built our national railway so many decades ago.
References
1,2Canada’s Freight Railways: Moving the Economy, railcan.ca/101/canadas-freight-railways-moving-the-economy/
3Delivering Canada’s Amazing Products to the World, railcan.ca/101/delivering-canadas-amazing-products-to-the-world/
4,5CN investing $210 million to expand and strengthen Saskatchewan’s rail infrastructure in 2018, cn.ca/en/news/2018/06/cn-investing-$210-million-to-expand-and-strengthen-saskatchewans/
6,7Farmers are the real victims of the GTH land deal, cbc.ca/news/canada/saskatchewan/farmers-victims-gth-land-deal-1.4793185
8Saskatchewan’s Export Potential: The Impact of Rail Access, conferenceboard.ca/temp/16c9886a-25f2-4744-ad91-08894caa8408/7221_SaskatchewanRail-RPT.pdf
9Crude oil shipments by rail reaching record levels ahead of harvest, realagriculture.com/2018/08/crude-oil-shipments-by-rail-reaching-record-levels-ahead-of-harvest/
10Record oil output from US, Brazil, Canada and Norway to keep global markets well supplied, iea.org/newsroom/news/2018/march/record-oil-output-from-us-brazil-canada-and-norway-to-keep-global-markets-well-.html