Over the past year, both the tragedy at Lac Mégantic and concerns surrounding the transportation of western grain have led to a renewed focus on and review of the regulatory regime under which Canadian railways operate. It is a particularly appropriate time for an overview of some existing and proposed economic and safety regulations for the transportation of freight by rail in Canada.
Economic Regulations:
Common Carrier Obligations and Third Party Liability Insurance Coverage
In both Canada and the US, railways must handle all traffic, including dangerous commodities, that is offered to them under legislative common carrier obligations. A railway does not have the ability to refuse to provide transportation services because it is inconvenient or unprofitable.
In Canada, a federal railway must meet certain third party liability insurance coverage requirements before it can be issued a certificate of fitness by the Canadian Transportation Agency (CTA). In August 2013 the CTA undertook a public review of its regulatory insurance requirements through consultation with various stakeholders: railway companies, railway associations, shippers, shipper associations, provincial and municipal governments and insurance bodies. Overall, three key questions have come to the forefront: (i) should there be regulatory minimum insurance requirements; (ii) should there be different requirements for the transportation of certain commodities; (iii) should risk be shared between railways, shippers and other parties, for example through a fund.
Regulated Service Level Agreements
Federal railway companies are required to offer a service agreement within 30 days after the day on which it receives the request from a shipper. If the shipper and the rail carrier cannot reach an agreement through commercial negotiations, shippers have access to a binding arbitration process to establish the terms and conditions of the confidential service agreement.
Regulated Interswitching
Interswitching involves the switching of cars from one federally regulated railway to another which will provide the “line-haul” or main movement of the rail cars. Shippers who are served by only one railway may transfer their traffic to another railway at a regulated rate as set by the CTA. Interswitching rights previously applied if the shipper’s facility was within a 30 kilometer radius from where the two railways connected, however new legislation came into force on May 29, 2014 which extends interswitching limits in Saskatchewan, Alberta and Manitoba to a 160 kilometer radius. The legislation is intended to improve the speed at which grain gets to its destination.
Maximum Grain Revenue Entitlement
There is a statutory limit on the amount of revenue a federally regulated railway may earn from the transportation of grain in Western Canada. The maximum revenue entitlement is established each year based on inflation, actual tonnage moved by each railway and the corresponding actual average length of the haul.
Final Offer Arbitration
Final Offer Arbitration (FOA) allows shippers to apply to the CTA for the settlement of disputes with rail carriers regarding rates or service. Arbitrators are independent of the CTA however an arbitrator’s decision is enforceable as if it were a CTA order. The FOA process is confidential and expedited. An arbitrator or panel of three arbitrators must decide between the shipper and carrier’s final offer, but unless captive, the shipper may always decide not to ship with the rail carrier if the outcome of the FOA is unsuitable for it. The arbitrator’s decision will remain in effect for one year retroactive to the date of the shipper’s initial submission to the CTA.
Railway Safety:
Grade Crossing Regulations
In February 2014 Transport Canada proposed grade (or level) crossing regulations. The goal of the proposed regulations is threefold: (i) create enforceable safety standards for federal grade crossings, similar to those for other railway and road infrastructure; (ii) create clear roles and responsibilities for railways, road authorities and private authorities to remedy multi-jurisdictional issues; and (iii) improve safety features such as unattended rail cars and sightlines.
Fines for Violations of the Railway Safety Act
This May the federal government proposed new Railway Safety Administrative Monetary Penalties Regulations which would give the Minister of Transport enforcement powers by creating fines up to $250,000.00 for companies and $50,000.00 for individuals that violate the Railway Safety Act. The amount of fines levied would be based on the severity of the violations.
Sylvie Land is one of the Legal Counsel at Canadian Pacific Railway Ltd., and is a graduate of McGill Law School.