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Saskatchewan Association of Rural Municipalities

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February 29, 2008

Mr. Michel Maisonneuve
Canadian Transportation Agency
Ottawa, Ontario
K1A 0N9
consultations@otc-cta.gc.ca

Attention Michel Maisonneuve,

The Saskatchewan Association of Rural Municipalities (SARM) is an umbrella association for all of Saskatchewan's 296 Rural Municipalities (RM).  All the agricultural land in Saskatchewan lies within these RM boundaries.  We are an independent association that represents all of the agriculture producers in Saskatchewan who produce 100 percent of the grains and oilseeds grown in Saskatchewan.  We have a vested interest in any matters that may impact the rates for grain transportation in Canada. 

The reality in Western Canada is that almost half of our grain is exported annually.  The grain we export must then travel either south to the United States/Mexico or over 1500 kms to either the eastern or western ports for overseas export.  Because of the economics of transportation and the vast distances these commodities must travel, it is most economically feasible for grain to be moved via rail.

Because the vast majority of grain is exported by rail, the costs incurred for rail movement is a determining factor in the competitiveness of Western Canadian Grain producers.  That is why it is important that any changes to interswitching regulations take into consideration how they will impact a producer's ability to compete in the world market.  Therefore we would like to submit the following comments regarding Railway Interswitching Regulations for consideration by the Canadian Transportation Agency (CTA).

SARM supports the continued use of a contribution level of 7.5 percent over railway variable costs in the development of the rates as we believe it will maintain effective competition where the resulting rates would be commercially fair and reasonable to all parties in accordance with section 112 of the Canadian Transportation Act.  Therefore we also support that the CTA continue to regulate interswitching rates to ensure they remain fair and reasonable to all. 

We do have some specific concerns with the proposed interswitching rate changes.  Firstly we would like to indicate our concern with the fact that rate differentials between the two tiers of the rate structure have increased.  The proposed changes in interswitching rates would increase the differential in rates for similar-sized car blocks, particularly at the upper end of the first tier, and the lower end of the second tier. 

For example, if 59 cars were interswitched under Zone 1 rates, one would pay $12,095, but if a block of 60 cars was interswitched the same distance it would cost only $3,000.  It is reasonable to assume that the average variable costs of moving each of these multi-car blocks would be similar.  Therefore we would suggest that the rates be adjusted to better reflect actual costs.  

Secondly we would like to point out a specific issue in the grain industry concerning car awards programs and how the proposed differential between the two tiers would essentially claw back any benefit an awards program would provide.  The railways, through the advance car awards program, are encouraging grain shippers to use 50-100 car blocks.  However, if grain shippers now choose to interswitch 50- 59 cars (bottom tier) you would be paying top dollar for the switch, negating any benefit from the awards program.  

We are also perplexed by the increased rate spread between smaller and larger distances from an interchange point.  The way the proposed rates are outlined the rate for interswitching within a shorter distance (Zone 1 and 2) is going to increase more than it is for longer distances (Zone 3 and 4), which will discourage interswitching at shorter distances.  

Lastly we would like to raise an issue we recognize in regards to co-production agreements and how the benefits achieved from the efficiencies these agreements result in are not shared back to the shipper.  SARM does recognize the greater efficiency that is associated with such agreements and we understand that railways are using these agreements to switch large numbers of cars 80 - 100 KMs away from the port of Vancouver to better organize shipments for efficiency outside the congested port itself.  

We note that shippers are not seeing any of the benefits of these interswitches because they are happening outside the 30 KM radius of an interchange that is outlined the Act.  We would suggest a review to determine if interswitching distances and zones could be expanded so shippers would recognize some of the benefits of these traffic exchanges outside current interswitching limits. 

This is an important review for all players involved in grain transportation and we thank you for the opportunity to provide our comments.

Sincerely,

David Marit
President

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