Letter Decision No. CONF-R-2-2023

This is a public redacted version of Confidential Decision CONF-R-2-2023 that issued on February 22, 2023.

February 22, 2023

Application by Meadow Lake Mechanical Pulp Inc. (MLMP) against the Canadian National Railway Company (CN) regarding CN’s alleged failure to meet its level of service obligations

Case number: 
22-17864

Summary

[1] On June 30, 2022, MLMP filed a level of service complaint with the Canadian Transportation Agency (Agency) against CN. In its complaint, MLMP seeks an order requiring CN to fulfill its level of service obligations for the receiving, carrying and delivering of bleached chemi-thermo mechanical pulp (pulp) traffic, and to reimburse MLMP for the expenses it incurred as a result of CN’s alleged failure to meet its level of service obligations. MLMP claims that during the period of January 1, 2022 to May 31, 2022 (complaint period), CN failed to provide a sufficient number of boxcars to transport its pulp traffic.

[2] Given that this complaint, and the remedies sought by MLMP, concern boxcars, the Agency will use the term “boxcars” throughout this decision, even in cases when a party has used the term “railcar” in its submissions.

[3] MLMP claims that, during the complaint period, CN breached its level of service obligations under the Canada Transportation Act (CTA) by failing to provide:

- adequate and suitable accommodation for the carriage and delivery of MLMP’s pulp traffic;

- all proper means for delivering pulp traffic to its destination in a timely manner; and

- a sufficient number of empty boxcars at the North Battleford Distribution Center (Transload) based on MLMP’s boxcar orders.

[4] MLMP seeks:

- an order that CN meet its level of service obligations by furnishing adequate and suitable accommodation for the carriage, unloading and
  delivery of its pulp traffic, and by receiving, carrying and delivering the pulp traffic without delay and with due care and diligence by
  delivering and making available to it a specific percentage of high capacity boxcars each week going forward;

- compensation for expenses it claims to have incurred as a result of CN’s breach; and

- an award of costs.

[5] For the reasons set out below, the Agency finds that CN breached its level of service obligations during the complaint period by failing to provide an adequate number of boxcars for MLMP to transport its pulp traffic. The Agency finds that CN has not provided the highest level of service to MLMP that it could reasonably provide in the circumstances, as required by the CTA.

[6] The Agency orders that until such time as the inventory of pulp that MLMP had in storage during the complaint period is reduced to levels consistent with storage levels in the period from January 1 to May 31, 2021 (the baseline period), which was 4,705 tonnes, CN must deliver to, and make available for loading at, the Transload no fewer than [REDACTED]% of high-capacity boxcars requested by MLMP, on a four-week rolling average, no fewer than [REDACTED]% of such boxcars requested by MLMP in any calendar week, provided in each case that MLMP requests no more than 20 such boxcars per day.

[7] Thereafter, CN is required to fulfill MLMP’s boxcar requests in a manner consistent with the service provided in the baseline period, unless circumstances change fundamentally. During the baseline period, MLMP’s service needs remained consistent at approximately 13 boxcars per day and CN provided approximately [REDACTED]% or more of requested boxcars.

[8] The Agency directs the parties to provide submissions on the compensation to which MLMP is entitled, including reimbursement of the additional amounts paid by MLMP to participate in CN’s car auction process, based on the requirements set out at the end of this decision. The Agency also directs the parties to provide submissions on whether costs should be awarded to MLMP.

Background

[9] MLMP produces pulp at its mill located in Meadow Lake, Saskatchewan. To ship pulp by rail, MLMP makes its request for boxcars to International Bulk Services of Canada (IBS), which is a wholly owned subsidiary of CN that operates the Transload. IBS then places boxcar orders with CN on behalf of all customers using the Transload, which includes MLMP.

[10] MLMP delivers the pulp to the Transload in trucks, where it is then transferred into empty boxcars for furtherance by CN to the Euro Asia terminal in Vancouver, British Columbia (Terminal). MLMP’s obligations are to deliver the pulp traffic to the Transload and to follow the procedures that have been established between the parties to place an order with CN for the number of boxcars required to transport the traffic.

[11] CN transports MLMP’s pulp traffic pursuant to the general tariff, in railway-supplied cars, from the Transload to export position at the Terminal. CN is the only rail carrier serving the Transload.

[12] From September 1, 2018, to August 31, 2021, MLMP’s pulp was shipped under the terms of a confidential contract between the parties. While the parties have been attempting to negotiate terms for a new contract, they did not have a confidential contract in place during the complaint period.

[13] MLMP’s complaint alleges a reduction in the number of boxcars delivered to the Transload by CN, which began in 2021, after their confidential contract expired. MLMP describes stable production levels, boxcar needs and delivery service in recent years, represented by a need for approximately 13 boxcars per day and a fulfillment rate by CN of approximately [REDACTED]% of MLMP’s boxcar orders. However, in the months leading up to the complaint period, MLMP claims that it did not receive a sufficient number of boxcars to transport the pulp it was producing. This required MLMP to move its pulp to various storage locations pending boxcar deliveries from CN, resulting in significant quantities of stored pulp at various locations. MLMP also claims that CN’s failure to meet its level of service requests during the complaint period forced MLMP to slow down and/or stop production at its mill multiple times beginning in January 2022. MLMP also alleges that the failure caused its business reputational harm as it was unable to meet customer delivery commitments.

Preliminary matter

Position statements

[14] On September 12, 2022, Gary Vidal, Member of Parliament for Desnethé‑Missinippi‑Churchill River, filed a position statement in support of MLMP’s application. On September 13, 2022, the Saskatchewan Minister of Highways and Infrastructure also filed a position statement supporting MLMP’s application. The Canadian Transportation Agency Rules (Dispute Proceedings and Certain Rules Applicable to All Proceedings) (Rules) provides that an interested party may file a position statement prior to the close of pleadings. Both position statements were filed before the close of pleadings and will therefore form part of the record for this proceeding.

The Agency’s approach to rail level of service complaints

[15] In accordance with the CTA, the Agency must find that a company has fulfilled its level of service obligations if it is satisfied that the company has provided the highest level of service in respect of those obligations that it can reasonably provide in the circumstances. The Agency must consider a non-exhaustive list of factors set out in the CTA when making this assessment.

[16] In Decision CONF-9-2019, the Agency reviewed key Agency, Federal Court of Appeal and Supreme Court of Canada decisions that interpreted the level of service provisions of the CTA and its predecessors. In that Decision, the Agency stated that based on the legislation and jurisprudence regarding level of service complaints, a railway company is required to make every reasonable effort to receive, carry, deliver, and unload traffic offered without delay, even in the face of challenges beyond its control, but it is not asked to do the impossible. The railway company’s obligations can only be determined in light of the specific circumstances of each case.

[17] When determining whether a railway company has fulfilled its level of service obligations, the Agency has, where appropriate, used an evaluation approach that assesses whether there is a gap between a shipper’s reasonable request for service and the service provided. Under this evaluation approach, the Agency considers three questions:

1) Is the shipper’s request for service reasonable?

2) Did the railway company fulfill this request?

3) If not, are there reasons which could justify the service failure?

[18] The Federal Court of Appeal found that this approach is reasonable in Canadian National Railway Company v Emerson Milling Inc., 2017 FCA 79.

[19] It is a shipper’s responsibility to convince the Agency that its request for service is reasonable and that there is a gap between its request and the service it receives. If such a gap is found to exist, the Agency will consider any justifications for that gap that the railway company presents. In so doing, the Agency will consider whether the railway company made every reasonable effort to receive, carry, deliver and unload the traffic offered without delay, even in the face of challenges beyond its control, or whether it was impossible for it to do so. If there is a reasonable justification, then the Agency will find that the railway company has met its service obligations. If there is no reasonable justification, then the Agency will find that there has been a breach of the railway company’s service obligations and will look to the question of remedy.

[20] In confidential 2014-10-03">Decision 2014-10-03, the Agency stated that the railway company must provide application-specific evidence of the efforts it has made to furnish adequate and suitable accommodation to move the shipper’s traffic, or compelling reasons why the shipper’s request cannot be reasonably accommodated. The evidence justifying a failure to provide a requested service must be put on the record by the railway company because the railway company is in the best position to identify and explain such a justification and because it is the railway company that has obligations under the CTA. The Agency will assess whether the service failure is justified based on this evidence.

Was MLMP’s request for service reasonable?

[21] The evidence filed by MLMP shows that during the complaint period, it ordered boxcars from CN through IBS to transport pulp that was produced at its mill. It is clear that MLMP had a legitimate demand for service and that it communicated its service needs using the ordering process established by CN.

[22] MLMP indicates that its actual daily production needs have been consistent since 2019, at approximately 13 boxcars per day. However, during the complaint period, MLMP ordered more boxcars than usual because it held an unusually high inventory of pulp that had accumulated when CN failed to transport this traffic in late 2021. MLMP claims it requested 20 boxcars per day through the majority of the complaint period to both move its daily production volumes and draw down its inventory.

[23] CN does not dispute that MLMP had a legitimate need for boxcars to transport its pulp traffic. However, CN does not address MLMP’s built-up inventory. Instead, CN argues that MLMP only requires 13 boxcars per day or less and that the higher number of boxcars ordered during the complaint period exceeded its historical requests and actual requirements.

[24] While the parties agree that MLMP ordinarily requires approximately 13 boxcars a day, MLMP has shown that during the complaint period, it in fact required more boxcars because of a buildup of inventory. While this inventory accumulated in the months immediately preceding the complaint period, the Agency finds that MLMP’s orders during the complaint period were legitimate given that MLMP had existing pulp traffic and sought to transport it.

[25] As for whether MLMP properly communicated its service requests to CN, there is no dispute between the parties that MLMP placed its orders through the process established by CN, namely by communicating its boxcar requests to IBS. The Agency notes that the parties disagree on the significance of IBS’s status as a wholly owned subsidiary of CN. This debate turns on the extent of CN’s actual knowledge of boxcars ordered by the Transload on behalf of shippers and the extent of CN’s control over how boxcars are distributed there. However, level of service obligations, which include responsibility for furnishing an adequate supply of railcars to shippers, rest with the railway company, irrespective of whether that process is managed by an intermediary, which, as noted in this case, is a Transload facility that is a wholly owned subsidiary of CN.

[26] As indicated in confidential Decision 2014-10-03, where the shipper has a legitimate demand for service and it has properly triggered the level of service provisions, its request will be considered reasonable. In this case, the Agency finds that MLMP had a legitimate demand for service to transport both its daily production amounts and its built-up inventory. The Agency finds that MLMP communicated its requests appropriately to CN. As such, the Agency finds that MLMP has triggered CN’s level of service obligation, and that MLMP’s requests for service were reasonable.

Did the Railway Company fulfill this request?

[27] MLMP claims that while CN has historically fulfilled approximately 80% of its boxcar orders, CN’s order fulfillment rate was reduced to approximately 45% during the complaint period.

[28] CN acknowledges that there is a gap between the level of service MLMP requested and the level of service that CN provided during the complaint period and it acknowledges that it did not provide sufficient boxcars to meet MLMP’s daily production needs during the complaint period.

[29] However, CN disputes the size of the gap alleged by MLMP. CN submits that based on MLMP’s stated actual daily production of 1,120 tonnes, it would require at most 13 boxcars per day, given that, on average, boxcars are loaded with 91.4 tonnes of pulp. CN states that the number of boxcars MLMP actually ordered is significantly greater than this, and suggests that the number of boxcars ordered may have included re-orders. That is, if MLMP did not receive all of the boxcars requested in one order, MLMP would add this shortfall to the number of boxcars requested in the next order. CN concludes that considering MLMP’s actual daily production needs, its fulfillment rate was somewhere between 65% and 69%.

[30] As the parties agree that 13 boxcars per day would be a sufficient supply based on MLMP’s production levels, the Agency accepts that this represents MLMP’s daily need for boxcars. However, MLMP submits that at the beginning of the complaint period it had an additional [REDACTED] tonnes of pulp at storage facilities waiting to be shipped. MLMP’s data supports its claim that during the baseline period, it held 4,705 tonnes of pulp in storage on average. However, the amount of pulp in storage at the beginning of the complaint period was [REDACTED] tonnes greater than their historical average, which represents the need for an additional [REDACTED] boxcars. Given that the complaint period comprises 151 days, the Agency finds that MLMP’s actual need for boxcars, based on both its planned production level and the amount of pulp it held in storage, was [REDACTED] boxcars. As the data shows that MLMP received only 1,275 boxcars, the Agency finds that CN’s fulfillment rate during the complaint period was approximately [REDACTED]%. Accordingly, the Agency finds that CN did not fulfill its service requirements to MLMP during the complaint period.

Are there reasons which justify the service failure?

[31] CN claims that the following reasons contributed to its inability to provide MLMP with the number of boxcars required to meet its transportation needs:

- an unexpected market shift that saw:

    • the total demand for boxcars increase across all commodities, and
    • a change in destinations for boxcar traffic that increased the total length of the haul;

- US Class 1 railways were slower than usual;

- it was colder than usual, for longer than usual; and

- Winnipeg received record snowfall.

[32] CN adds that each of the above factors had a compounding effect on cycle times that impaired the total available boxcar supply. It claims that all of these factors are outside of its control and justify its failure to provide MLMP with a sufficient number of boxcars to meet it needs.

[33] MLMP disputes CN’s stated justifications for the gap, and suggests that the gap was actually the result of a systematic failure by CN to meet its boxcar demands due to a range of issues, including a lack of equipment and crew, as well as an inadequate boxcar fleet.

[34] The Agency must consider the evidence to determine whether CN has provided the highest level of service that it could reasonably provide in the circumstances. Among the non-exhaustive list of considerations set out in the CTA, the Agency will consider the parties’ operational requirements and restrictions and the railway company’s contingency plans when faced with foreseeable or cyclical events. As set out in Decision 2014-10-03, the Agency may consider alternatives offered and, where relevant, extenuating circumstances beyond the railway’s control. In that Decision, the Agency indicated that the level of service obligations placed on a railway company imply that it must make efforts to identify measures in advance of the course of events and to make necessary arrangements to address its customers’ needs. The Agency will consider evidence of such efforts in this case.

Increased demand for boxcars

[35] CN claims that between 2021 and 2022, total boxcar orders increased by 36% across commodities, and goes further to state that combined with increased cycle times, “CN would have required twice the fleet to meet total orders”. This affected its ability to meet its customers’ service requests. CN explains that the surge in demand was not forecasted by the shippers, or by CN, and that they did not have any lead time to acquire additional resources, even if they were available in the market, which they claim they were not. CN provides data showing that during the complaint period, its fulfillment rate for boxcar requests across its system was 47%.

[36] MLMP claims that CN has failed to provide evidence to support its claim of an increase in boxcar demand across commodities. MLMP submits that CN’s evidence shows that during the complaint period, when compared to the same period in 2018, boxcar demand was lower in Western Canada, including at the Transload, and only 3.5% higher across CN’s system. MLMP argues that the increased demand in 2022 should not be considered an unprecedented surge, but rather accumulated demand resulting from previous CN service failures. MLMP also argues that CN failed to take steps to increase its boxcar fleet until March 2022, despite knowing by the second quarter of 2021 that its fleet was at or near capacity.

[37] With respect to MLMP’s argument that the evidence of a surge may in fact include reordered boxcars, the Agency notes that CN stated that counting all car orders and reorders can significantly overstate the total boxcar shortfalls. In that context, MLMP noted that it could also overstate demand. For example, MLMP ordered 2,854 boxcars during the complaint period, to accommodate daily production and product that was placed in storage due to boxcar order shortfalls. This represents a [REDACTED]% increase in their boxcar orders over the complaint period to contend with those shortfalls. At the same time, CN has not indicated whether reordered cars from all customers contributed to the 36% surge in boxcar demand across the system during the complaint period, but given MLMP's experience, it appears likely.

[38] While CN claimed that it did not anticipate a surge in demand for boxcars, the Agency finds that CN did not explain how it forecasted demand and what steps it took to plan for, or address, demand for boxcars. The evidence does show that from January 2020 to January 2022, CN’s boxcar fleet dropped from 11,376 to 9,435. CN indicates that there were no boxcars available in the current market, but despite increased demand beginning in 2021, it did not order additional cars until 2022, for delivery in 2023 and 2024. Finally, while evidence produced by CN demonstrates an increase in demand for boxcars during the complaint period, regardless of the actual size of the surge, the Agency finds that CN did not establish that the increase was significantly above what could be considered a return to historic demand levels, or unforeseeable given the uptick in economic activity following the global pandemic. Accordingly, the Agency finds that CN has not established that there was a 36% increase in demand that affected its ability to meet MLMP’s level of service requests during the complaint period.

Increased haul length

[39] CN submits that some of its customers changed their shipping destinations, indicating in particular an unexpected reduction in rail traffic to British Columbia and an increase in rail traffic moving into the US. It provides evidence indicating that its online loaded miles increased from the baseline period to the complaint period, and that online loaded miles during the complaint period were the highest they have been in 11 years.

[40] MLMP claims that according to CN’s own data, its online loaded miles did not increase to any significant extent in 2022. MLMP submits that CN’s data shows that online loaded miles only increased by 3.4% between the baseline and complaint periods, and were only 0.1% higher in the complaint period than they were in 2019.

[41] In examining the data provided by CN, the Agency agrees with MLMP that CN’s data does not demonstrate a significant, unexpected increase in online loaded miles during the complaint period. The data shows that online loaded miles had been increasing from 2013 to 2019, decreased slightly in 2020, 2021, and increased in 2022, to nearly the same distance as in 2019.

[42] While an increase in online loaded miles would have an impact on a railway company’s cycle times, the data provided by CN demonstrates that online loaded miles had been trending upward for almost a decade, and that in the complaint period they had returned to pre-pandemic levels. Given this, the Agency finds that the increase in online loaded miles does not constitute an unforeseeable circumstance that CN could not have planned for, nor can it conclude that this constitutes a justification for CN not meeting its level of service obligations to MLMP.

Cold weather

[43] CN claims that cold temperatures in Western Canada during the complaint period caused reduced system velocity. It states that when temperatures drop below -25 oC, a train’s length and speed must be reduced for safety reasons. It submits that in Western Canada, between January 1, 2022 and March 31, 2022, 71 of 90 days saw temperatures below -25 oC, with 38 of those days having a temperature below -35 oC, which would result in even greater restrictions on train lengths. CN adds that these restrictions impose operational changes that lower the system’s overall velocity which, in turn, impacts the supply chain’s shipping capacity overall.

[44] In support of its position, CN provides data regarding the temperatures during the complaint period in Edmonton, Alberta; Jasper, Alberta; Prince George, British Columbia; Saskatoon, Saskatchewan; Sudbury, Ontario and Winnipeg, Manitoba. However, this data shows only 51 different days when the minimum recorded temperature was -25 oC or below at one or more of these locations, with 6 of those days having a minimum temperature of -35 oC or below at one or more of these locations.

[45] In its reply, MLMP claims that there are several deficiencies in the data provided by CN, which include irrelevant locations and temperature measurement issues. MLMP claims that CN has failed to establish the impact of cold weather on its ability to meet its service requests.

[46] The Agency accepts that during periods of extreme weather, railway companies are faced with operational constraints, such as corridor restrictions, speed limitations and train length reductions that reduce their ability to maintain operations at normal levels, which can, in turn, increase car cycles times (see, for example, Decision 2015-07-10 in EMI v CN).

[47] In CN’s 2021-22 Winter Plan, which was submitted by both parties, CN identifies recent actions that they have taken aimed at improving winter operations. While the Agency acknowledges both difficult winter operating conditions in Canada and CN’s efforts to address these, the relevant question in this case is the extent to which the weather was extraordinary and how it specifically affected the provision of boxcars to MLMP. In that context, the Agency does not find any evidence to suggest that the temperatures experienced during the complaint period were extraordinary relative to other Canadian winters.

[48] Accordingly, the Agency finds that CN has not established that cold weather during the complaint period is a justification for its failure to meet MLMP’s service requests.

Record snowfall in Winnipeg

[49] CN submits that all empty boxcars requested by MLMP come from either Northwestern Ontario or the US Midwest and travel through Winnipeg en route to North Battleford, Saskatchewan. CN provides evidence showing that for the period of December 1, 2021 to March 31, 2022, Winnipeg received 142.8 centimetres of snow, which was the most it had received during this timeframe in the past 60 years. CN submits that given that amount of snowfall, yard operations in Winnipeg had to be shut down on numerous occasions to clear snow before operations could resume, which impaired cycle times for boxcars.

[50] MLMP argues that CN has not established or even estimated the actual impact that snowfall in Winnipeg had on boxcar supply to the Transload during the complaint period.

[51] The Agency recognizes that heavy snowfalls require a rail company to clear snow in order to perform certain yard operations and that the data provided by CN regarding the boxcar cycle times for MLMP shows that there was an increase in the total time boxcars spent in rail yards overall. However, CN has not provided data to demonstrate the effect that heavy snowfalls during the complaint period had on its Winnipeg yard compared to previous years, such as the number of times the yard had to be closed to clear snow and the duration of those closures. The Agency accepts MLMP’s argument that CN has not explained the impact of large snowfalls at its Winnipeg yard on CN’s ability to meet MLMP’s service requests. In the absence of such evidence, the Agency finds that CN has not established that the amount of snowfall in Winnipeg during the complaint period justifies its failure to meet MLMP’s service requests.

Increased cycle times

[52] CN has argued that increased online loaded miles, cold temperatures in Western Canada, and snowfall amounts in Winnipeg, all contributed to an increase in cycle times for boxcars, adversely affecting its ability to meet its level of service obligations.

[53] While the Agency has rejected CN’s justifications related to online loaded miles, cold temperatures and snowfall amounts in Winnipeg, based on the evidence presented, the Agency will nevertheless consider CN’s argument related to increased cycle time. When examining the data provided by CN regarding cycle times, its system-wide online average cycle times increased by only 1.8% – from 16.8 to 17.1 days – from 2021 to 2022, while its overall system cycle times increased from 22.5 to 24.7 days during the same period, an increase of 9.8%. However, between 2021 and 2022, MLMP’s cycle times increased from 18.93 to 22.99 days, an increase of 21.4%. CN’s data also show that boxcar cycle times for MLMP increased from an average of 18.96 days during the baseline period to an average of 24.1 days in the complaint period, which represents an increase of 27.1%. CN has not provided an explanation for this particularly negative impact on MLMP’s cycle times. In absence of any explanation, the Agency finds that CN has failed to establish that these issues justify the gap between the level of service MLMP requested and the level of service provided by CN.

US Class 1 railways slower than usual

[54] CN submits that its overall cycle times during the complaint period were adversely affected by the reduced velocity of traffic on US railways. In support of this, it provides evidence demonstrating that offline travel time was higher and that offline velocity was lower during the complaint period when compared to the baseline period. CN submits that the reduced velocity on US railways was caused primarily by crew shortages. In response to an Agency direction requiring CN to respond to MLMP’s request for written communications between CN and US carriers respecting boxcar shipments in Canada, CN provided hyperlinks to hearing transcripts and a decision from the United States Surface Transportation Board (STB) in a case titled Urgent issues in freight rail service. The hearing was held on April 26 and 27, 2022, before the end of the complaint period. CN highlighted excerpts from the testimony of several US Class 1 railway representatives. In these excerpts, witnesses provide several general explanations for recent service struggles in the US, including crew shortages, and describe recent crew hiring and training measures. The STB’s decision noted the railways’ claims and called for service recovery plans and greater US railway reporting. While this evidence provides some insight into difficulties experienced by the US railway network in Winter 2021-22, it is difficult to link this evidence in any meaningful way to CN’s service to MLMP in this case.

[55] Moreover, while the evidence provided by CN shows that offline travel time increased from 5.7 days in the baseline period to 7.5 days during the complaint period, it also shows that between 2011 to 2022, it varied considerably, from a low of 4.9 days to a high of 9.1 days. This data demonstrates that offline travel times have been higher in the past than what was experienced during the complaint period. Given these variations in offline travel time since 2011, the Agency finds that CN has not provided an explanation as to why it was unable to manage or compensate for the recent increase in offline travel time.

Conclusion on CN’s justification for the service failure

[56] The Agency finds that CN has not established that it made every reasonable effort to receive, carry, deliver, and unload MLMP’s traffic offered without delay, even in the face of challenges beyond its control. The evidence and justifications provided by CN do not establish that the reasons for the gap in service were unforeseeable, nor that CN provided the highest level of service that could be reasonably provided in the circumstances. Accordingly, the Agency, finds that CN has breached its level of service obligations to MLMP during the complaint period.

Remedies sought by MLMP

An order defining a minimum level of service that CN would be required to provide

[57] MLMP seeks an order from the Agency requiring CN to provide no fewer than [REDACTED]% of the high capacity boxcars MLMP requests at the Transload each week, and to provide a four-week rolling average of no fewer than [REDACTED]% of the boxcars MLMP requests, provided that MLMP requests no more than 20 boxcars per day.

[58] CN argues that an order for a guaranteed future car supply for an indefinite period of time would require the Agency to be satisfied that anything less than fulfilling [REDACTED]% of MLMP’s boxcar requests would be a breach of CN’s level of service obligations. CN argues that such a determination cannot be made in the context of MLMP’s complaint to the Agency. It also argues that ordering 20 boxcars per day appears to be unreasonable, as 13 boxcars per day is sufficient based on MLMP’s stated production level.

[59] In support of its arguments, CN cites Decision 2015-03-12. In that case, the applicant filed a complaint concerning a pending policy change by CN that it believed would result in a breach of its level of service obligations. However, as the applicant’s complaint involved a hypothetical failure by CN to meet its level of service requirements, the Agency dismissed the application, which included a requested order requiring CN to meet future service requests. In that case, the Agency could not order a remedy in response to an unproven level of service breach.

[60] The present case is markedly different as MLMP has established that a level of service breach occurred. Where a breach is established, the Agency has broad discretion to craft a remedy, including the power to order a specific future car supply without a defined time limit. Under the CTA, the Agency can make prospective orders for a railway company to construct works, acquire property or allot or distribute cars in the manner specified by the Agency. The Agency can also order a railway company to fulfill its obligations in any manner and within any time or during any period that the Agency deems expedient, having regard to all proper interests, and to specify the particulars of the obligation to be fulfilled. Where it establishes a condition of service, the Agency must ensure that it is commercially fair and reasonable to all parties.

[61] In this case, the Agency finds that it is appropriate to make an order respecting CN’s future car supply to MLMP for two reasons. First, the evidence shows stability in both MLMP’s service requirements and CN’s service performance over several years preceding the complaint period. Second, the evidence shows that a lack of predictability in boxcar service had immediate and serious detrimental effects on MLMP’s operations, including shutdowns and production slowdowns beginning in the first month of the complaint period. In this case, a remedy centred on a specific boxcar supply will ensure that the Agency’s order is as practicable as possible for both parties and results in a predictable car supply level that, historically, has satisfied MLMP’s needs and CN has been able to meet.

[62] MLMP’s planned production has, in its words, remained “relatively flat” since 2019, with an associated service requirement of approximately 13 boxcars per day. There is no dispute that CN has historically delivered approximately [REDACTED]% of boxcars requested, to MLMP’s satisfaction. Data provided by CN shows that for the periods of January 1 to May 31, it was able to provide more than [REDACTED]% of the boxcars requested by MLMP during the years 2019, 2020 and 2021. In light of this, the Agency finds that MLMP’s request for an order requiring CN to supply at least [REDACTED]% of the boxcars it requests is reasonable.

[63] CN has raised the concern that an indefinite Agency order in relation to boxcar supply should not amount to a finding that anything below the specified level is automatically a service breach. This is in effect an argument about the possibility that circumstances between the parties may change. The Agency’s order to return to and maintain previous boxcar supply levels should not be read as to prevent MLMP’s business needs from changing. Nor should it be read to preclude the possibility that circumstances may prevent CN from reasonably providing this boxcar supply sometime in the future. Accordingly, the Agency’s order will remain in effect unless there is a fundamental change in circumstances between the parties.

[64] An obvious fundamental change in circumstances is that MLMP’s service requirements may evolve. In such a case, the Agency’s order can no longer have effect between the parties, although CN will continue to have the statutory obligation to provide adequate and suitable accommodation for MLMP’s traffic even if its needs change. It is also possible that, at some point, providing [REDACTED]% or more of boxcars to MLMP will not be reasonably possible in the circumstances for CN, for example, for reasons outside of CN’s control. However, given the stable history of service between the parties over the past number of years and the fact that CN has not provided acceptable evidence in this case to justify the level of service provided during the complaint period, the Agency expects that any such circumstances would be exceptional and temporary. The Agency expects that CN will take measures that will allow it to meet its service obligations as they arise, including maintaining an appropriate boxcar fleet so that should extraordinary measures, including car rationing, be required, they are as limited in time and scope as possible.

[65] The Agency notes that MLMP’s requested relief would allow it to order up to 20 cars a day indefinitely. The Agency finds that this request is not supported by the evidence. In its reply, MLMP explains that its request for 20 boxcars per day during the complaint period was necessary to both draw down its inventory and meet its regular, daily service requirements. The Agency accepts that ordering 20 boxcars per day is necessary as a temporary measure.

[66] Accordingly, the Agency grants MLMP’s request to be permitted to order up to 20 boxcars per day only until such time as the inventory of pulp MLMP had during the complaint period is returned to levels consistent with the level of inventory MLMP reported having during the baseline period, namely 4,705 tonnes.

[67] Thereafter, provided there is no fundamental change in circumstances, the Agency orders CN to provide a level of service to MLMP that is consistent with its historical service levels, where MLMP’s service needs represent approximately 13 boxcars per day, and CN has delivered approximately [REDACTED]% or more of boxcars requested.

MLMP’s requested compensation for expenses and the cost of its application to the Agency

[68] MLMP claims that it had to take mitigation measures as a result of CN’s lack of service, which caused MLMP to incur expenses that would not otherwise have been as great, including trucking expenses; warehousing and storing expenses; out of pocket expenses associated with excess inventory at Meadow Lake; and incremental expenses incurred by participating in CN’s railcar auction process.

[69] In its answer, CN raises issues with the expenses that MLMP claims, and states that MLMP must provide reliable evidence associated with the expenses and that CN must be given a fair opportunity to respond. In its reply, MLMP agrees with CN’s position on this matter, and requests that this issue be bifurcated. The Agency agrees with this approach and will seek submissions from the parties on this matter in accordance with the timelines set out below.

Order

[70] Until the inventory of pulp MLMP had during the complaint period is reduced to historical levels of 4,705 tonnes, the Agency orders CN to provide no fewer than [REDACTED]% of the high-capacity boxcars MLMP requests at the Transload each week, and to provide a four-week rolling average of [REDACTED]% or more of the boxcars MLMP requests, provided that MLMP requests no more than 20 boxcars per day.

[71] Thereafter, provided circumstances do not change fundamentally, CN is to provide service at historical levels of approximately [REDACTED]% or more of MLMP’s daily need for approximately 13 cars per day.

[72] The Agency provides MLMP until 5:00 pm Gatineau local time on March 15, 2023, to submit evidence in relation to the expenses it has claimed to have incurred as a result of CN’s failure to meet its level of service obligations during the complaint period and to provide a copy to CN. CN will then have until 5:00 pm Gatineau local time on the tenth business day after the receipt of MLMP’s submissions to file a response and to provide a copy to MLMP. Finally, MLMP will have until 5:00 pm Gatineau local time on the fifth business day after the date of receipt of CN’s response to file a reply. A reply must not raise issues or arguments that are not addressed in the response or introduce new evidence unless a request has been made under the Rules and that request has been granted by the Agency.

[73] This is a public redacted version of Confidential Decision CONF-R-2-2023 that issued on February 22, 2023.


Legislation or Tariff referenced Numeric identifier (section, subsection, rule, etc.)
Canada Transportation Act, SC 1996, c 10 26; 37; 113; 114; 115; 116
Canadian Transportation Agency Rules (Dispute Proceedings and Certain Rules Applicable to All Proceedings), SOR/2014-104 23; 34

Member(s)

Elizabeth C. Barker
Lenore Duff
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