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Tisdale Alfalfa Dehy Ltd.

Producers of GREEN LEAF Alfalfa Products

January 31, 2008

Dear Mr. Maisonneuve,

Re: Review of the Railway Interswitching Regulations (File No. 7360-6)

One of the values of the Canadian Transportation Agency (CTA) is that it strives to provide the highest level of expertise and to reach decisions through an impartial, transparent and fair process. As a part of the responsibilities of the Canadian Transportation Agency's, one of its mandates is to resolve complaints between shippers and railways concerning rail rates.

The issue concerning the continued discriminatory actions against rail shippers with less than 60 car rail spots is of major issue. And again with these proposed changes, the overall gap widens again in favour of larger shippers with interswitching rates increasing in the less than 60 car shippers while rates drop for 100 car shippers. It's difficult to understand how costs have actually decreased to switch 100 car blocks. It's unfortunate railways are playing such a major role in the success of smaller freight businesses, allowing larger shippers breaks in costs while placing a further burden on these smaller shippers.

To further examine this issue and to illustrate the biased administered by the Railways and endorsed by the CTA, an example of two different businesses shipping approximately 1000 cars with the only difference being their interswitching capability. Using the information provided by the CTA, the overall average of Proposed Interswitch Fees was calculated for "less than 60" and "60 or more cars". The average across the 4 Zones was $241.25 and $65 per car for "less than 60" and "60 or more cars" respectively. As well, the Proposed Rates per Kilometre of $3.90 and $1.50 per kilometre for "less than 60" and "60 or more cars" respectively were also used.

Table 1. Comparing the average cost to ship 1000 cars depending on interswitch capacity.

Interswitch sizeAvg Interswitch FeesFreight (1900 km to port)Total CostAvg Cost / MT
< 60 cars $241,250 $7,410,000 $7,651,250 $90.01
60 or more cars $65,000 $2,850,000 $2,915,000 $34.29

The alternative may be in a Flat Fee Charge per car, regardless of the size of the block, combined with surcharges based on the size of the block ordered.

# of CarsProposed
Rate Per
CarNote 1
Proposed
Total
Alternate
Minimum
Rate
Alternate
Surcharge
Per Car
Alternate
Surcharge
Total
Alternate
Total
20 $300 $6,000 $8,000     $8,000
30 $300 $9,000 $8,000     $8,000
40 $300 $12,000 $8,000 $50 $2,000 $10,000
50 $300 $15,000 $8,000 $40 $2,000 $10,000
60 $85 $5,100 $8,000 $30 $1,800 $9,800

The above chart outlines an example of a potential Flat Fee Charge. It aims to promote larger shipments while at the same time spreading the overall cost a little more evenly.

It's understandable there are some cost increases to handle smaller blocks of cars. However, it is also known that these smaller blocks of cars are combined with others at the railways nearest shipping yards (to the pick up) before being freighted to port. It seems highly unlikely that it would cost nearly 3 times as much to ship 50 cars versus 60 cars.

In light of its mandates and values, endorsing any increases in railway interswitching and rates per kilometre should be viewed as an unfair act by the CTA. An increase of 7.5% over variable costs was viewed by the CTA as an appropriate compensation. May it be noted that agriculture producers and grain handlers would not object to a guaranteed profit level as well. Examining only the costs involved with the railway without examining their customers cost increases is in fact unfair. An impartial and fair process would involve a balanced approach examining both sides. As a whole, Canadian Railway Customers, and in particular agricultural producers have seen their costs sky rocket over the past ten years.

Furthermore, the CTA should not just examine direct costs to railways and their customers, but in fact take into account overall profitability of the railways and their customers. For the second year in a row, the CPR exceeded its allowable grain hauling revenue by $3.76 million. The year prior, the CPR and CNR combined to exceed the cap by $4.2 Million.

It should also be noted that the CTA recently ruled that CN failed to live up to its service obligations to six prairie grain shippers in 2006-07 crop year in regards to equal shipping opportunities to all. This further exemplifies the bias towards small shippers by the railway. It is disappointing, as a smaller shipper, to receive both 3 times the cost to ship combined with poorer service.

It is our organizations viewpoint, that these increases are unjust in light of excess profitability and poor service displayed by Canadian Railways in spite of the continued financial suffering of agricultural producers. In light of the railways outrageous profit level, it is simply disappointing that the CTA would suggest increases.

Sincerely,

D. James Leier
Chief Business Development Officer

Notes

Note 1

This is the proposed rate proposed for Zone 4.

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