For Immediate Release
March 30, 2015
Report puts price on future rail access limitations that Saskatchewan can’t afford
The Saskatchewan Chamber of Commerce is pleased to unveil today a report commissioned by the Chamaber from the Conference Board of Canada :TheImpact of Rail Access on Saskatchewan's Export Potential.
“After the problems our exporters experienced in the winter of 2013/14 the Saskatchewan Chambercontracted the Conference Board of Canada to conduct this research,” explained Saskatchewan Chamber CEO Steve McLellan. “We recognized then the absolute necessity of getting ahead of any future rail supply chain issues.”
Using the provincial government’s Plan for Growth targets, the Conference Board studied the estimated growth in demand for Saskatchewan’s ten main export commodities. The research concluded that to achieve 71% of the Growth Plan’s target for 2020 from these commodities the rail system will have to transport, at minimum, an additional 20 million tonnes of goods relative to 2012.
“This represents almost a 50% increase in originating tonnage,” continued McLellan. “And with close to half of the province’s exports [by value] relying on rail for some part of their journey, the importance of rail supply chain capacity cannot be overstated.”
Failure to establish the required capacity would have a tangible negative impact on the provincial economy. According to the Conference Board’s estimates, meeting only 80% of this increased demand for rail transportation would result in a total negative GDP impact of $3.6 billion, while meeting only 90% of it would have a negative impact of $1.8 billion.
“The rail backlog experienced in the winter of 2013/14 cost a lot of industries a considerable amount of time and money, something that we need to take strategic action on now to avoid repeating, and exacerbating, again in the future,” concluded McLellan. “Incurring such large costs for a problem we could start solving today would be a disservice to the entire province.”
To improve the efficiency of Saskatchewan’s rail-based supply chain and ensure thatit will not be a constraint to export growth in the future, the Conference Board made nine recommendations in the report:
- Investigate the full impacts of the Maximum Revenue Entitlement (MRE).
- Reduce the cost of shipping by rail to and from the province
- Encourage greater and timelier communication across the logistics supply chain
- Increase coordination with governments and infrastructure providers outside of the province
- Increase supply chain options and redundancy
- Consider the full effects of legislative solutions while focussing efforts on long-term rather than short-term solutions.
- Determine the current capacity and the “right size” of on-farm storage
- Determine the impact of pipeline expansion opportunities
- Examine alternative hopper car purchasing arrangements
To read the full report please visit: or for a quick look at some of the recommendation details, see the background information below.
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For further information, contact:
Steve McLellan, CEO
Saskatchewan Chamber of Commerce
Cell: 306.533.7686
Email:
Background Information
More about the Recommendations:
Investigate the full impacts of the Maximum Revenue Entitlement (MRE)
The MRE is a limit on the average revenue per tonne that railways can earn on the shipment of regulated grains from Western Canada to the Port of Thunder Bay or to ports in British Columbia. As 15 years have passed since the MRE was implemented, a full and public review is warranted.
Reduce the cost of shipping by rail to and from the province
Railways pay nearly $40 million in fuel taxes annually to the Saskatchewan government as a result of aparticularly high provincial fuel tax per litre(15 cents per litre). Given the dependence onrailways to get products to market, it makessense to at least bring fuel taxes in line withother provinces.
Encourage greater and timeliercommunication across the logistics supplychain
Better and timelier sharing of informationcan help shippers and railways prepare fordisruptions. For example, faster real-timeinformation from the railways to shippers whenthey become aware that delays will occur willhelp shippers avoid labour overtime costs.
Increase coordination with governmentsand infrastructure providers outside of theprovince
Saskatchewan and its economy has asdirect an interest in investments and efficienciesat Port Metro Vancouver, Prince Rupert andThunder Bay as it does in investments in freightinfrastructure within the province. As a result,the Government of Saskatchewan has as muchinterest in being involved in supporting thoseinvestments either directly or indirectly.
Increase supply chain options and redundancy
For Saskatchewan – a provincethat is more landlocked than any other – anyincreased redundancy in terms of routingoptions to export markets is valuable.Whether this means helping to fundice-breaking capacity on the Great Lakes andSt. Lawrence Seaway or more indirect methodsof enabling redundancy, it is a factor that shouldbe considered if export growth continues tobe a provincial priority.
Consider the full effects of legislativesolutions while focussing efforts on long-termrather than short-term solutions
Policiessuch as the Order-in-Council, which specifiedthe minimum amount of grain to be movedmay have unintended consequences. Thepossibility of such unintended consequencesundermining supply chain efficiency should be considered and monitored.
Determine the current capacity and the“right size” of on-farm storage
The extent ofon farm grain storage is currently unknown,but the need for storage was painfully evidentduring the 2013-14 crop year. Policymakersshould investigate the barriers, financialor otherwise, to investing in more on farmstorage in order to determine the value insome solutions.
Determine the Impact of PipelineExpansion Opportunities
The growing roleplayed by rail in transporting crude oil is largelya result of current pipeline access becomingincreasingly constrained. Governments needto make a concentrated effort to work throughthe political intricacies that have bottleneckedpipeline expansions and determine the impact,if any, on rail service for other commodities.
Examine Alternative Hopper CarPurchasing Arrangements
The grain hoppercar fleet in Canada is aging and in need ofreplacement. Newer cars are both shorter andlighter and as a result contribute to an increasein the carrying capacity of approximately 25per cent per train. The federal and provincialgovernments should identify and remove thebarriers to new hopper car purchasing, as itrelates to potential ownership by railways,shippers, or third-parties.