Letter Decision No. 2014-12-18

Redacted version

December 18, 2014

APPLICATION by Richardson International Limited against the Canadian National Railway Company pursuant to section 116 of the Canada Transportation Act, S.C., 1996, c. 10, as amended.

Case number: 
14-03127

APPLICATION

[1] On June 12, 2014, Richardson International Limited (RIL) filed a level of service application with the Canadian Transportation Agency (Agency). RIL submits that the Canadian National Railway Company (CN) breached its statutory level of service obligations to RIL by:

  • Failing to allocate rail cars in accordance with the rail car rationing methodology communicated by CN to RIL in the fall of 2013; and
  • Further reducing RIL’s rail car allocation by approximately 300 cars during the week of May 18 to 24, 2014 and every third week after.

[2] RIL requests that the Agency order CN to:

  1. Provide RIL no fewer rail cars than RIL should be allocated pursuant to a methodology established by CN for rationing rail cars based on historical shipments (CN Rationing Methodology);
  2. Not draw from car allocations that would otherwise be available to RIL in order to meet its obligations under the Louis Dreyfus Commodities Interim Order (LDC Interim Order);
  3. Order CN to provide sufficient additional rail cars to RIL over a period of 14 weeks, or such other period as the Agency considers appropriate, to make up for the shortfall between the number of cars actually provided to RIL from January 1, 2014, and the number of cars that would have been allocated to RIL had CN lived up to its commitment to RIL; and,
  4. Grant such further and other relief as the Agency may deem reasonable in the circumstances.

ISSUE

[3] Did CN breach its level of service obligations to RIL for the receiving, carrying and delivering of rail cars as set out in sections 113 to 115 of the Canada Transportation Act (CTA)?

POSITIONS OF THE PARTIES

RIL

[4] RIL is a large privately-owned agri-food business, which operates port terminals in Vancouver, British Columbia, Thunder Bay, Ontario, Hamilton, Ontario and Sorel, Quebec; canola crushing plants in Lethbridge, Alberta and near Yorkton, Saskatchewan; grain milling operations in Portage la Prairie, Manitoba, Martensville, Saskatchewan, Barrhead, Alberta, South Sioux City, Nebraska and Dawn, Texas; as well as one of Canada’s largest networks of grain elevators with facilities throughout western Canada.

[5] RIL competes with other agricultural companies in buying grain from Canadian producers and selling that grain both within Canada and throughout the world. RIL’s logistics system relies heavily on railway companies to provide reliable service for the movement of grain and oilseeds from its primary elevators to its terminals or end-use customers.

[6] According to RIL, approximately 85 percent of the volume originated through its grain handling system moves to the final North American destinations by rail, and truck transportation is only practical for its short-haul domestic shipments, which represent a small portion of its business. RIL further indicates that it has 26 primary elevators that are served exclusively by CN.

[7] RIL indicates that in the first few months of the 2013-2014 crop year, after a late start to the harvest, western Canadian grain farmers harvested a record 75.8 million metric tonnes of grain.

[8] RIL explains that on August 15, 2013 after it became apparent that production would be significantly larger than the previous crop year, RIL provided CN with a forecast of its rail transportation requirements for grain weeks 5 through 22 of the 2013-2014 crop year. RIL adds that on September 11 and 18, it advised CN that it was forecasting grain production to exceed 70 million metric tonnes and set out certain critical service parameters for CN that included adequate car supply, accurate empty spotting plan, timely communication of service changes and the importance of reliability.

[9] RIL asserts that the railway companies, including CN, failed to provide the number of rail cars required to accommodate grain traffic, and that this resulted in the accumulation of a significant backlog of demand, causing a substantial disruption in the movement of Canadian grain over the winter of 2013-2014.

[10] According to RIL, it was advised by CN in October 2013 that CN was implementing the CN Rationing Methodology. Specifically, RIL submits that CN indicated that it would use the volume of grain that each shipper moved during grain weeks 8 to 22 of the 2012-2013 crop year as a basis for determining the share of the total number of cars each shipper would receive under the CN Rationing Methodology, and further that the 11 CN-serviced elevators acquired by RIL from Viterra Inc. on May 1, 2013 would be taken into account in determining RIL’s share of CN service.

[11] RIL submits that pursuant to the CN Rationing Methodology, CN committed to provide RIL with redacted percent of CN’s total weekly allocation. RIL submits that it did not agree with CN’s decision to ration rail cars or with the CN Rationing Methodology. Further, it has had outstanding car orders in excess of its redacted percent of CN’s Average Total Weekly Car Spots in the months relevant to this application. RIL states that, in spite of this, it did rely on CN’s allocation commitment in planning its shipments and entering into contracts with customers.

[12] RIL also submits that, on May 8, 2014, subsequent to the issuance of the LDC Interim Order, CN advised RIL that it should expect its weekly rail car allocation to be reduced by approximately 300 cars every three weeks for the duration of the LDC Interim Order. In this regard, RIL states that it understands that the applicant in that case alleged in part that CN had a contractual obligation to provide it with a certain number of rail cars pursuant to a confidential contract, which is binding on the Agency.

[13] RIL maintains that, despite being contacted by RIL on numerous occasions in an attempt to address the service shortfalls, CN has, since January 2014, consistently provided RIL with fewer cars than the percentage of the total weekly allocation which CN committed to provide to RIL.

[14] RIL asserts that since the issuance of the LDC Interim Order, CN has further reduced RIL’s rail car allocation. RIL submits that in particular, during the weeks of May 18 to 24, 2014 and June 8 to 14, 2014, CN arbitrarily and unjustifiably reduced the number of cars allocated to RIL by approximately 300 cars, thus widening the gap between CN’s planned service and RIL’s share under the CN Rationing Methodology.

[15] RIL contends that, in addition to effectively transferring its market share to another shipper, each 300 car reduction imposed on it by CN’s arbitrary and discriminatory practice represents the immediate financial consequence of approximately redacted in lost sales being reassigned to another shipper.

CN

[16] In response to the application, CN submits that due to the size of the 2013 grain crop, which exceeded the volume of prior years’ crops by a large margin, the 2013-2014 crop year presented a unique challenge for rail transport, requiring CN to implement rationing in a manner that had previously not been done. CN states that in prior years, although rationing was required briefly during extreme surges in demand, over the course of the entire year CN was able to fully satisfy shipper demands.

[17] CN maintains that the increase in demand, which greatly exceeded supply, required CN to react by imposing rationing of rail cars and that, in doing so, CN attempted to be fair and transparent, instituting a program that was based on the historical shipping percentages of its customers.

[18] CN states that the rationing methodology it employed was not a binding commitment, but that the percentages derived were instead guideline targets used for allocation that were communicated to customers as such.

[19] CN adds that, in order to respond to changes in circumstances over the course of the crop year, it acquired additional cars, which it specifically allocated to address those particular changed circumstances.

[20] CN asserts that its intention was to meet the allocation estimates over the course of the crop year, but a severe winter combined with certain regulatory orders and other demand challenges complicated its ability to exactly meet those percentages.

[21] CN contends that despite the significant challenges, CN provided RIL with rail cars in excess of its guideline allocation target percentage and has fully met its statutory service obligations to RIL by providing RIL with adequate and suitable service.

EVALUATION APPROACH

[22] In a confidential Decision dated October 3, 2014 (October 3 Decision), (a public version of which is published at https://www.otc-cta.gc.ca/eng/ruling/2014-10-03), the Agency established the following Evaluation Approach for level of service applications filed pursuant to the statutory obligations set out in section 116 of the CTA:

Unless the Agency determines that an applicant is not eligible to apply under the level service provisions of the CTA, the Agency will consider three questions in evaluating a level of service application, namely:

  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?
  1. If there is a reasonable justification, then the Agency will find that the railway company has met its service obligations;
  2. 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.

[23] In this case, the Agency notes that no issue as to RIL’s standing to apply under the level of service provisions of the CTA has been raised and the Agency determines that RIL is eligible as a “person” to have its case considered under sections 113 to 116 of the CTA.

STEP 1: IS THE SHIPPER’S REQUEST FOR SERVICE REASONABLE?

[24] In the October 3 Decision, the Agency stated that:

Where the facts indicate that the shipper has a legitimate demand for service and that it has properly triggered the level of service provisions in making a request for service, its request will be considered reasonable.

POSITIONS OF THE PARTIES

CN

[25] CN points out that RIL does not contest the need for rationing or the entitlement of CN to have rationed cars during the 2013-2014 crop year.

[26] CN also contends that it is a feature of grain transportation that there are periods when demand far exceeds rail capacity and rationing is required. It indicates that car rationing is required in most crop years, even those of relatively low production, typically during the post-harvest peak demand period and at times during the winter.

[27] CN maintains that the need for rationing has been acknowledged throughout the years and is incontrovertible. In support of this, CN cites a report produced by the Western Transportation Advisory Council in May 1998, titled Grain Handling and Transportation Profile (Westac report), and an excerpt from a July 2000 CN grain marketing publication titled General Allocation – Canadian Ports and North American Destinations, which outlines a CN rationing methodology based on the historical seasonal traffic corridor shipping percentages for each loader and the Canadian Wheat Board. CN also contends that recognition and acceptance of this process of rationing was noted in the Final Report of Justice Willard Z. Estey submitted to the Minister of Transport on December 21, 1998 (Estey report).

[28] CN maintains that the same fundamental principles are still relevant today and that grain shippers understand that railway companies cannot possibly meet all demand all the time. It submits that this fact has been recognized by the Supreme Court of Canada in Patchett & Sons Ltd. v. Pacific Great Eastern Railway Co. [1959] SCR 271, where it stated: “a railway is not bound to furnish cars at all times sufficient to meet all demands,” and that the notion that a railway company cannot accommodate all demand at all times provides the basis for the “reasonableness” that pervades the level of service obligations found in the CTA.

[29] CN argues that it needs flexibility in the way it conducts its rail operations, including its rationing methodology, in order to deal with any number of unexpected contingencies, shifting priorities and changing circumstances that arise in the course of a “typical” crop year and affect the demand for its assets and its operational ability to service its grain customers. It contends that rigid policies or strict adherence to an arithmetic formula may work in theory, but not in practice, and for the purpose of complying with its level of service obligations, it must be given the ability to make decisions “in real time.”

[30] With respect to the 2013-2014 crop year, CN maintains that the exceptional events and extraordinary circumstances it faced in that year underscored the need for a fair, consistent and reasonable rationing methodology to be implemented.

[31] CN states that after recognizing in the fall of 2013 that weekly car order requests for its western grain hopper cars were consistently exceeding what the grain supply chain could reasonably be expected to handle, it implemented a rationing system and criteria designed to provide objective guideline allocation targets that CN would aim to achieve on an ongoing basis.

[32] According to CN, because the size of the crop enabled all of its customers to ship more than their historical shares for the rest of the crop year, all shippers were lobbying CN to each have more cars allocated to them. In response, and to avoid having to arbitrate between those subjective arguments, CN favoured the use of historical shares as they provided a neutral approach directly connected to the market.

[33] CN explains that the methodology it implemented was based on each shipper’s historical use of CN’s grain service during the post-harvest period during the 2012-2013 crop year, which was the first crop year following the end of the Canadian Wheat Board monopoly on grain marketing.

[34] Specifically, CN states that it used the volumes of grain that each shipper moved during grain weeks 8 to 22 of the 2012-2013 crop year as a basis to determine the share that each of those shippers would receive under rationing during crop year 2013-2014. According to CN this reference period was chosen because: it was in the recent past and as such was reflective of the current customer base and infrastructure; it was a period when rationing was required; grain was available in all regions to all customers and all destination ports were operating; and the pace of car order requests broadly matched CN’s pace in car spotting.

[35] CN states that under this methodology, historical market shares were calculated and assigned for all shippers including RIL based on their shipments during grain weeks 8 to 22 of the 2012-2013 crop year, together totalling 100 percent of CN’s movement.

[36] According to CN, it did not withhold an additional percentage of the allocation to allow for a “float” of additional capacity and that it allocated all available cars in order to maximize volume movements each week. CN adds that the implication of such a methodology is that adding a percentage to one shipper’s allocation necessarily meant that a corresponding percentage would need to be taken from another shipper or a combination of shippers.

[37] CN points out that using historical shipping percentages is one of several methods of rationing that are consistently referred to as guidelines in the Guidelines for Rationing of Car Orders publication found on CN’s public Canadian Grain Web site. CN submits that the methods are to be rolling and flexible in their application over several weeks and that they are not strict requirements or prescribed mandated standards or meant, necessarily, to be used in isolation of each other.

[38] CN argues that it is, therefore, not proper and contrary to CN’s intentions for RIL to claim that its service entitlement is strictly entrenched at the redacted percent allocation they discussed in October 2013 and that no other circumstances can be considered by CN for distribution of cars subsequently acquired throughout the crop year. CN claims that RIL’s attempt to elevate the specifics of CN’s Rationing Methodology to a contractual commitment or statutory obligation is unfounded. CN also argues that to do so improperly removes from CN the operational and commercial discretion necessary to deal with evolving circumstances, such as changed elevator capacity and other contingencies to which CN had to adapt.

[39] CN explains that its policy is that it does not guarantee an exact number of cars to any customer. Further to this, CN denies that it ever made a “commitment” to RIL to provide RIL with a set percentage of cars or that CN’s communication of its guideline allocation target percentage somehow constituted an enforceable obligation. It submits that, consistent with its policy, the percentage communicated to RIL was not a guarantee, but rather an estimated guideline target, communicated in order to provide some assistance to RIL as to what it could expect by way of car allocation in times of rationing.

[40] CN maintains that it has not contractually committed to provide RIL with a set number of hopper cars per week. CN argues that no contract was established, and that it is well established that unless consideration is given, a contract is not created.

[41] CN argues that, although CN and RIL are in a relationship that would give rise to a duty of care, there was no misrepresentation, as none of the other elements required for negligent misrepresentation are present, those elements being: the representation must be untrue, inaccurate, or misleading; the representor must have acted negligently in making such representation; the representee must have relied in a reasonable manner on such representation; and, the reliance must have been detrimental so that damages would result.

[42] CN contends that calling a gratuitous promise a misrepresentation does not render it actionable.

RIL

[43] RIL submits that CN does not dispute having informed RIL that RIL would receive a redacted percent allocation of CN’s car supply, but that CN now claims that the allocation was a “guideline” or “gratuitous promise” rather than a commitment. It is RIL’s position that the allocation commitment made by CN, though set at a level substantially less than RIL required, was, nevertheless, binding.

[44] RIL submits that CN has not provided any evidence that the rail car allocation for the 2013-2014 crop year as communicated to RIL was intended to be a guideline. To the contrary, RIL submits that the evidence before the Agency indicates that both CN and RIL treated the redacted percent allocation as a binding commitment.

[45] In support of this, RIL cites various e-mail communications between CN and RIL that were submitted with its application. RIL contends that in the March 6, 2014 e-mail there is an acknowledgement on the part of CN that it failed to provide the number of cars promised and that it was CN’s intention to attempt to remedy the shortfall. RIL submits that in the May 8, 2014 e‑mail, CN refers to RIL’s shipping percentage and allocation as a defined entitlement from which CN will deduct 300 cars and recognizes that entitlement in stating that CN will try to reinstate the cars to RIL should CN successfully defend its level of service in Agency Case No. 14-02100. RIL argues that there is no indication in this communication that the redacted percent allocation is merely a guideline or gratuitous promise that CN can unilaterally decide not to fulfill. RIL states that in the May 24, 2014 e‑mail, CN refers to “RIL’s entitlement,” as opposed to a guideline percentage. In addition, RIL refers to numerous, repeated commitments made by CN to RIL to provide redacted percent of CN’s total weekly allocation, as documented by submissions included in RIL’s response to CN’s questions.

[46] RIL maintains that the fact that RIL’s allocation percentage remained at redacted percent throughout the crop year and was not changed by CN to provide a different target is evidence of the binding nature of the allocation, that it was not a mere guideline that CN could unilaterally change when it found itself falling short. RIL contends that CN considered itself bound by the allocation throughout the crop year and acted accordingly.

[47] With respect to allegations by CN that “unless consideration is given a contract is not created,” RIL submits that, because CN does not expressly allege that RIL failed to provide consideration for the allocation commitment from CN, it is therefore undisputed that RIL provided consideration for CN’s commitment.

[48] RIL adds that the evidence indicates that RIL provided at least two forms of consideration for the commitment, the first being the benefit to CN of RIL tailoring its rail car forecasts and orders based on the allocation commitment. RIL cites its response to CN’s Questions 17(b) and 38, which indicate that RIL would have bought, sold and shipped significantly more grain than it did, had it not been for constraints in CN’s car supply. RIL submits that its weekly forecasts of car orders and actual car orders were not indicative of RIL’s requirements, but reflected the allocation commitment. RIL adds that it could have flooded CN with sufficient orders to fulfill its actual shipping requirements, but did not do so.

[49] RIL describes the second consideration as being forbearance in not filing a level of service application based on RIL’s actual shipping needs. To this point, RIL reiterates that it did not agree with CN’s decision to ration rail cars or with the CN Rationing Methodology but, at the time, refrained from challenging CN’s Rationing Methodology through regulatory proceedings and instead relied on it in planning shipments and entering into contracts with customers. RIL maintains that its responses to CN’s Questions 17(b) and 38 also demonstrate that RIL had excess capacity both at its CN serviced country elevators and at port terminal facilities. RIL states that, although the allocation commitment did not meet its needs, it did not complain because it was prepared to work with CN based on CN’s commitment to allocate a specific percentage of its total car allocation to RIL.

[50] RIL argues that CN’s allocation commitment does not have to be in the nature of negligent misrepresentation for the Agency to order CN to provide the rail cars that it committed to provide and that it does not rely on the tort of negligent misrepresentation in its application.

[51] However, RIL disputes CN’s allegation that only one of the five required elements for a negligent misrepresentation is present: a duty of care based on a “special relationship.” In particular, RIL submits that: a) if, as alleged by CN, the allocation commitment was never more than a guideline, referable only to some unspecified portion of CN’s total weekly spots, then the representations made by CN regarding RIL’s allocation and catching up on any shortfall were inaccurate and untrue, and CN knew them to be so; b) CN acted negligently in making commitments that it was either unable or unwilling to fulfill; c) RIL relied on CN’s representations in planning its operations, as indicated in its responses to CN’s Questions 17(b) and 22(a) and (b); and d) RIL’s reliance on CN’s representations was detrimental and resulted in damages in the form of lost sales and reputational damage as indicated in Appendix B to its application.

ANALYSIS AND FINDING

[52] Paragraphs 9 through 73 of the October 3 Decision contain a detailed account of the history, development and past interpretations of a federal railway company’s service obligations under sections 113 to 115 of the CTA, including how these obligations relate to the economic well-being of Canada.

[53] To put this complex analysis in its simplest terms, a railway company’s fundamental service obligation pursuant to sections 113 to 115 of the CTA is to provide adequate and suitable accommodation for “all traffic offered for carriage” unless it is not reasonably possible to do so. Integral to its level of service obligation, a railway company must have sufficient capacity in place to meet the demands placed upon it. However, the evidence on the record indicates that during the period relevant to the application, CN was in a situation where demand exceeded its capacity and therefore all demands could not be met. As a result, CN implemented a rationing methodology. Therefore, it is in the context of this rationing regime that the Agency must decide on the reasonableness of RIL’s service request.

[54] In general terms, the Agency considers that, in light of a railway company’s fundamental service obligation, rationing should only be relied on to deal with a temporary inability to deliver full service. In a properly functioning demand-driven system, rationing should not be relied on routinely to smooth out the seasonality of the demand for Canadian grain shipping.

[55] However, given the record 2013 crop in western Canada, an export grain volume that was 50 percent higher than average, and the relatively short notice given to the rail system to react to the resulting transient surge in demand, the Agency agrees with CN that the 2013-2014 crop year presented a set of extraordinary circumstances that would justify the temporary need for a rationing methodology.

[56] In fact, both RIL and CN assert that, in light of the extraordinary volume of grain available, more grain would have moved, had there been sufficient rail capacity to move it. Because RIL’s service request in this application is based on RIL’s car entitlement under CN’s rationing methodology, which is less that what RIL would have otherwise ordered, the Agency will consider that, in this specific case, RIL’s car entitlement under the rationing method used by CN represents a reasonable car request.

[57] CN explains how its historical market share rationing methodology was intended to provide a neutral approach, directly connected to the market, with no capacity withheld, with which it could fairly, consistently and reasonably allocate all its available cars in order to maximize volume movements each week.

[58] However, when determining if a railway company’s level of service obligations have been met, it must be kept in mind that rationing is, by nature, a method used by a railway company to deal with a situation in which it has insufficient capacity to receive, carry and deliver traffic that shippers tender to it. Because of this, the Agency considers that, in general terms, a rationing methodology that is consistent with the level of service obligations of railway companies must be clear, transparent, fair, temporary and consistently executable in the short term. It must also be understood by the shippers who are subject to it, be clearly communicated and, preferably, be the product of consultation and industry input. The methodology chosen must be applied fairly and consistently and be communicated properly, even in an environment where the pool of available cars is in a state of expansion or contraction.

[59] Since RIL has not challenged the validity of CN’s decision to use a market share‑based rationing methodology, the Agency will assess the merits of RIL’s application by examining what level of service RIL should have received, having regard to RIL’s car entitlement under CN’s market share-based rationing.

[60] CN recognizes the importance of fairness and consistency when it submits that adding a percentage to one shipper’s allocation necessarily means that a corresponding percentage would need to be taken from another shipper or a combination of shippers.

[61] However, CN then contradicts this statement by arguing that its methods are to be rolling and flexible over several weeks and that the historical allocations were not firm commitments but merely guidelines - guidelines that the Agency notes were not expressed in approximates, but with a degree of specificity to the first decimal place. If it was CN’s intention that its methodology should have some form of rolling flexibility, it should have, at a minimum, specified the rolling period.

[62] It is clear that under a market share-based car rationing methodology, there is no guarantee of a specific number of cars. However, each shipper should ultimately receive the number of cars that their market share represents. Rationing cannot be applied in an arbitrary or discriminatory way, with no accountability, and a rationing methodology ceases to be consistent with statutory railway company level of service obligations if it is not applied fairly with rigour and consistency.

[63] Having calculated and communicated a relatively precise allocation standard for RIL, which was derived from historic market share data, CN cannot expect to then be entitled to compromise the integrity of that standard by viewing it as a mere guideline or soft obligation and veer from it unilaterally and without proper notice. CN itself has set the allocation standard that it should have met. If a railway company unilaterally assumes the role of gatekeeper of the car supply, as CN did in this case, it must also accept the stewardship responsibilities that accompany that role.

[64] The parties argue at length about whether CN’s communication to RIL of RIL’s allocation percentage for car rationing purposes constituted an enforceable obligation in the nature of a contractual commitment, and whether failure to meet that percentage constituted negligent misrepresentation. However, nothing in sections 113 to 115 of the CTA makes the level of service obligation conditional on the existence of a contractual commitment or any other common law principles, such as negligent misrepresentation.

[65] All that is required to give rise to a railway company’s obligation is a reasonable request to transport goods, as the Agency stated in the October 3 Decision:

[41] Where the facts indicate that the shipper has a legitimate demand for service and that it has properly triggered the level of service provisions, its request will be considered reasonable. If the Agency finds that a shipper’s request is reasonable, it will turn its attention to the second step of the Evaluation Approach.

[42] The Agency is of the opinion that this approach is in keeping with subsection 113(2) of the CTA, which requires that traffic be taken, carried to and from, and delivered upon payment of the lawful rate, and paragraph 113(1)(c), which requires that this be done without delay. Together, these provisions set out part of a railway company’s level of service obligations, which is to carry all traffic that is tendered to it for carriage and to do so without delay. Accordingly, if there is a reasonable request to transport goods, the railway company has an obligation under the CTA to transport those goods.

[66] Therefore, the Agency finds that, with its actual service requirements constrained by rationing, it was reasonable for RIL to request that it receive service at a level that met the historical shipping percentage allocation imposed by CN’s car rationing methodology, that is redacted percent of CN’s total available car supply. Moreover, considering RIL’s need for predictable and reliable service to plan its operations and purchase and sales programs, the Agency finds that for RIL to require CN to comply with that percentage allocation also constitutes a reasonable request.

STEP 2: DID THE RAILWAY COMPANY FULFILL THIS REQUEST?

[67] In the October 3 Decision, the Agency stated:

[44] In general terms, a railway company has a statutory level of service obligation to provide adequate and suitable accommodation for the receiving, loading, carrying, delivering and unloading of rail cars to the extent that the service requested is reasonable in the circumstances, as discussed in Step 1.

[45] Where the Agency finds that the service request is reasonable, it will determine whether the railway company has fulfilled that request.

[68] In evaluating whether the railway company fulfilled the service request, in the context of the current case, it is first necessary to establish the parameters within which the evaluation will take place.

PERIOD TO BE TAKEN INTO ACCOUNT

[69] To substantiate its application, RIL included supporting data from grain weeks 23 to 43. At CN’s request, this data was subsequently updated by RIL to grain week 47 in its response to CN’s question 44 on July 11, 2014. Further to this, CN had the opportunity to review and include a response to the updated data in its answer submitted on July 17, 2014.

[70] Although grain week 47 postdates the application, the Agency has determined that it will base its analysis on grain weeks 23 to 47 for three reasons:

  1. Examining the period from grain weeks 23 to 47 allows for analysis of the longest possible service period subsequent to the LDC Interim Order, a period for which RIL alleges increased discriminatory treatment.
  2. A longer period better enables the Agency to determine whether the future breach alleged by RIL actually materialized over at least a few weeks following the filing of the application.
  3. All parties have had the opportunity to make submissions based on this period.

WEEKLY CAR SPOT DATA TO BE ANALYZED

[71] In its submission, RIL included tables comparing the actual number of CN cars spotted weekly at RIL’s facilities to CN’s Average Total Weekly Car Spots as published by CN on its Web site. RIL indicates that the CN total weekly averages are the weekly averages published by CN in its Western Canada Grain-Order Book Report.

[72] In the course of its examination, the Agency noted a 100‑car per week discrepancy between the CN’s Average Total Weekly Car Spots data submitted by RIL for grain weeks 44 through 47 (i.e., June 1 through 28, 2014) and information included in CN’s submission with respect to its average weekly service in the month of June 2014, with CN reporting the average as 100 cars more per week than RIL’s submission. Given that RIL did not supply any material to support the CN’s Average Total Weekly Car Spots number it used in its updated data for grain weeks 44 through 47, the Agency has based its analysis for grain weeks 44 through 47 on the weekly average number of cars spotted by CN as supplied by CN.

[73] CN does not dispute the accuracy of the CN total weekly averages submitted by RIL. However, CN argues that total spotted car averages include the following cars, which were not actually available for general allocation:

  1. “rolled orders” from a previous week;
  2. part of CN’s Fleet Integration Program (FIP); and/or
  3. regulatory order cars.

[74] For grain weeks 23 to 43, CN submits what it considers to be the impact on the total car supply of all three factors combined: cars available for general allocation are reduced to 78,522. CN also submits the impact on total car supply of just the FIP and regulatory order factors: cars available for general allocation are reduced to 86,360. However, CN does not specify how many FIP cars or how many regulatory order cars are included in its adjustments nor what it considers the weekly impact of each of these factors to be, either singularly or combined.

i) Rolled order cars

Positions of the parties

[75] CN submits that allocation targets were based on “new orders” for the industry. It indicates that cars that were ordered and allocated but not spotted in any given week are:

  • carried over into subsequent weeks as “rolled orders”;
  • provided to the shipper to whom they were previously allocated; and,
  • are not properly part of the pool for general allocation.

[76] CN argues that including rolled orders in calculating the cars available for general allocation is double counting and results in an artificially inflated allocation. CN maintains that in order to determine the actual allocation percentage on new orders, the rolled orders must be deducted from the actual car spots indicated in CN’s Average Total Weekly Car Spots submitted by RIL. CN submitted an adjusted total for the number of general allocation cars for grain weeks 23 to 43 that it indicates includes a reduction for rolled order cars.

[77] RIL submits that CN has not provided any evidence that CN’s allocation commitment to RIL was based on “new orders for the industry” or that CN communicated that basis for the calculation to RIL. It argues that evidence submitted by RIL clearly demonstrates that CN committed to provide RIL with redacted percent of CN’s total weekly car supply and that the allocation was not limited only to new orders.

[78] RIL adds that CN’s answer confirms that intention in stating: “This allocation methodology involved CN disbursing its total existing rail car supply among all of its grain shippers based on their historical shipping percentages on CN during grain weeks 8 to 22 of the last crop year” [emphasis in original].

[79] RIL argues that the method RIL uses to calculate a shortfall does not use planned allocation but instead uses only actual cars spotted figures, which, to the extent that they include “rolled” cars, counts them only in the week in which they were actually placed, so there has been no double counting.

[80] RIL maintains that its entitlement in any given week is not reduced simply because CN failed to spot sufficient cars and that the entitlement from any shortfall remains until the shortfall is remedied in a subsequent week. Further, RIL states that its evidence demonstrates that over the period covered by the application, such shortfalls occurred consistently, that CN failed to remedy them, and that they have resulted in a cumulative shortfall of approximately 2,500 rail cars.

[81] Further to this, RIL submits that as CN has chosen not to provide any details about how many cars in each week were spotted against new orders and how many were spotted against “rolled orders”, the only way in which to assess whether a service breach has occurred is to compare actual cars spotted for RIL to CN’s total number of cars spotted.

Analysis and finding

[82] To account for “rolled orders,” CN submitted a total number of cars spotted by CN in grain weeks 23 to 43 which equates to a reduction to the total submitted in RIL’s data table of 7,838 cars.

[83] Based on the evidence submitted by the parties, it is not possible for the Agency to determine whether CN has applied market share allocations only to new car orders after allocating cars to fulfill “rolled orders.” In fact, CN’s document General Allocation – Canadian Ports and American Destination Documents, filed by CN to support its claim that car rationing has been in place for years, makes no mention of rolled orders being taken off the top. If CN’s Guideline for rationing of car orders makes any reference to rolled order cars being taken off the top, CN has failed to prove it as that Guideline was not filed in the record of this proceeding. There is also no evidence that CN communicated these stipulations to RIL when implementing its rationing methodology.

[84] As CN filed no evidence to demonstrate how the total number of spotted cars needs to be adjusted down, week over week, for a total of 7,838 cars over the relevant period, the validity of the reduction cannot be verified.

[85] In any event, the Agency does not consider further numerical analysis to be necessary. Although it is understandable that the need to fulfill rolled orders could have a bearing on forward-looking allocation decisions, the Agency does not consider it reasonable to assume that a service failure in one week would alleviate a service provider from its obligations with respect to that week’s unfulfilled service demand in subsequent weeks.

[86] A level of service application is essentially a performance assessment exercise, which is by definition backward-looking. Therefore, even if in the process of allocating cars on a weekly basis CN included the rolled car orders as a factor in its allocation planning process, it is reasonable to expect that, unless the rolled orders were never fulfilled, comparing the total service provided to individual service received would reflect accurate measures of individual market share allocation over time.

[87] Therefore, with respect to the issue of rolled order cars, the Agency finds that RIL’s approach of assessing performance over the period under analysis by comparing the average weekly total cars spotted by CN to the actual number of cars spotted to RIL is sound. The issue of whether the cars spotted were rolled or were in fact new orders is immaterial to assessing performance over the period.

ii) FIP cars

Positions of the parties

[88] CN explains that FIP cars are part of its Western Canada Covered Hopper Fleet Integration Program, which was introduced in February 2014 and allows grain, oilseed and specialty crop shippers to enter into agreements to supply privately owned, covered hopper cars for integration, incremental to general distribution, into CN’s Western Canadian Common Fleet.

[89] CN adds that the program offered a total of 800 cars, available only for 25-car block shipments for CN-served loading locations in western Canada to non-port destinations in the U.S., eastern Canada or western Canada. CN indicates that, as of the date of its answer, the majority of the 800 cars have been integrated and that some of CN’s customers have experienced difficulty in finding all the hopper cars they have been allowed and have committed to.

[90] CN submits that FIP supplied cars are not included in the base allocation numbers; that they are intended to be “taken off the top” of the total car supply and not be distributed as part of the general allocation based on historical percentages. CN points out that RIL participated in FIP and the cars it received pursuant to FIP were above and beyond its allocation pursuant to the guideline allocation target.

[91] RIL indicates that, as stated in CN’s literature explaining the program, FIP did not start until April 1, 2014 (grain week 35). RIL states that the numbers included in its submitted tables in the CN’s Average Total Weekly Car Spots column are based on the actual total spots as published by CN in its Western Canada Grain Order Book Report, which does not disclose what CN has included or excluded from the published number.

[92] RIL submits that CN has not disputed RIL’s statement in its response to CN’s Question 51(a)(i)  that FIP did not have a significant impact on car spots during the period to which the application relates either for RIL or the industry, nor has CN led any evidence with respect to the impact of FIP cars on RIL’s allocation.

Analysis and finding

[93] CN submits that the total number of cars spotted against which RIL’s market share was applied in grain weeks 23 to 43 should be reduced to 86,360 (from RIL’s submitted 91,659 – a difference of 5,299 cars), to reflect that FIP cars and regulatory cars are not part of the general allocation. However, CN did not differentiate between the impact of FIP and regulatory orders or provide any explanation as to how it arrived at that number.

[94] The Agency notes that the FIP program was not implemented until April 1, 2014, so no matter how many FIP cars are to be taken into account, these FIP cars can only impact the nine week period from grain week 35 to 43. Assuming 100 percent implementation of 800 FIP cars beginning in week 35, (which based on CN’s submission is known to be an overstatement – as FIP was still not fully implemented at the time CN answered the application), and a 28-day cycle time for the grain weeks in question, (as stated by CN in its FIP literature), the maximum impact that FIP cars could have on CN’s Average Total Weekly Car Spots is 198 cars per week (856 cars per month), totalling 1,782 cars over nine weeks.

[95] CN also submits that the weekly impact of the LDC Interim Order and the arbitration decision it needed to comply with represented additional demands on the car supply equivalent to redacted percent of a 5,000 car offering. This amounts to redacted cars per week and a total of redacted cars over the four‑week period between grain week 40 and 43 (assuming that CN immediately complied with the LDC Interim Order issued at the end of grain week 39).

[96] Based on this analysis, the Agency considers the adjustment CN claims is required to account for these factors to be overstated, and that it cannot be relied on.

[97] Furthermore, despite its opportunity to do so, CN has not provided any tangible evidence regarding any of the following:

  • what CN means by a “majority” implementation of FIP;
  • at what pace FIP implementation occurred;
  • how many FIP cars, if any, are included in CN’s Average Total Weekly Car Spots, week over week; or,
  • how many, if any, and in which weeks FIP cars were spotted to RIL.

[98] Consequently, the Agency finds that CN has not provided supporting material to sufficiently demonstrate the actual car reduction to take FIP cars into account.

iii) Regulatory order cars (i.e. Order in Council (OIC), Bill C-30, LDC Interim Order, level of service arbitration decision)

Positions of the parties

[99] CN indicates that the historical shipping percentages relied upon by RIL were established prior to the OIC and Bill C-30 being implemented. It submits that the allocation percentage was also set before the LDC Interim Order, which ordered CN to provide the shipper involved with more than twice the number of cars it had previously received, and a level of service arbitration decision, which granted another shipper more cars than CN’s allocation methodology provided for.

[100] CN submits that because these regulatory interventions result in shippers receiving more rail cars than their historic percentages, other shippers must necessarily receive less of the remaining pool of rail cars. CN contends that CN’s Average Total Weekly Car Spots should be adjusted to account for this, but that amount was not specified by CN.

[101] RIL asserts that the OIC does not replace CN’s statutory service obligation to grain shippers under sections 113 to 115 of the CTA; it is not a determination of that obligation; and, it was not intended to authorize CN to limit its total carriage of grain and provide a guaranteed supply of rail cars to some grain shippers at the expense of others.

[102] RIL maintains that CN has provided no evidence to substantiate its allegation that cars delivered pursuant to the LDC Interim Order must be taken “off the top” of CN’s car supply for all shippers. RIL submits that its submission includes evidence, particularly the chain of e‑mails between CN and RIL, in which CN communicated a planned 300 car per week reduction for RIL every third week, which clearly indicates that the LDC Interim Order cars were taken directly out of individual shippers’ allocations.

[103] RIL argues that this indicates that CN did not spread the reduction in car supply amongst all shippers every week, but rather took 300 cars directly out of RIL’s allocation once every three weeks with a promise to “keep an accounting of it and try and find ways to get it back to you should CN eventually win that case.” RIL submits that, consequently, CN unilaterally forced RIL to assume an arbitrary 33.3 percent of the reduction in car allocation to shippers other than the shipper involved in the LDC Interim Order.

Analysis and finding

[104] CN submits that its historical shipping percentages were calculated prior to the implementation of the OIC and Bill C-30, but provides no evidence that these regulatory and legislative measures impacted car allocations based on historical market share, or reasons why they might have. Furthermore, the Agency agrees with RIL that these measures were not intended, in any way, to supplant a railway company’s level of service obligations under the CTA, but rather to reinforce them. Mandated service levels determining the minimum size of the whole service offering should have no effect on the equitable division of the service offering on a percentage of the whole basis.

[105] With respect to the impact of the LDC Interim Order and the arbitration decision on the car supply to other shippers, as previously noted, CN’s submitted adjustment is unsubstantiated and appears overstated.

[106] The Agency recognizes that under certain circumstances there will be cars that cannot or should not be included in the general allocation rationing pool and agrees with CN that the LDC Interim Order required CN to allocate a fixed number of cars to LDC.

[107] That being said, the Agency cannot determine the magnitude of the impact of the LDC Interim Order without any substantiating evidence or detailed analysis as to whether CN had allocated these cars “off the top” of the total car supply and not from individual shippers’ allocations on a rotating and disproportionate basis, as alleged by RIL. Accordingly, no reduction can be applied to CN’s Average Total Weekly Car Spots to reflect LDC Interim Order cars for the period.

[108] Furthermore, the Agency finds overall that CN has failed to establish that the total number of cars spotted in grain weeks 23 to 43 should be reduced to 86,360 or that the data respecting CN’s Average Total Weekly Car Spots filed by RIL cannot be relied on by the Agency when assessing whether a breach has occurred.

LEVEL OF SERVICE PROVIDED

[109] RIL’s application contains two alleged breaches:

  1. An allegation that CN breached its statutory level of service obligations to RIL by failing to allocate rail cars to RIL in numbers equal to redacted percent of CN’s total weekly allocation
  2. An allegation that CN breached its statutory level of service obligations to RIL by further reducing RIL’s rail car allocation by approximately 300 cars during the week of May 18 to 24, 2014 and every third week thereafter in order to meet its obligations under the LDC Interim Order.

i) Failure to provide redacted percent of CN’s spotted cars

Positions of the parties

[110] In the updated data table submitted by RIL for the period from grain week 23 to 47, RIL calculates that there has been a shortfall between the number of cars it received from CN and the number of cars it was entitled to receive based on a redacted percent share of CN’s total weekly allocation, amounting to 2,779 rail cars.

[111] CN argues that it is not enough for RIL to assert that because CN was to provide redacted percent of its total weekly allocation to RIL, but only actually delivered redacted percent of that allocation, that CN is in breach of its statutory level of service obligations. CN adds that whether or not RIL received redacted percent less than the historical guideline is not determinative of the question of whether CN provided a reasonable and adequate service to RIL in the unique circumstances of the 2013-2014 crop year.

[112] CN submits that it is required to provide RIL with a “basic level of service” in accordance with its statutory common carrier obligations, and that a basic level of service takes its meaning from the circumstances encountered by the railway company, including such external factors as peak demand and adverse weather conditions. CN asserts that the proper approach for the Agency is to consider “whether the railway company, in the circumstances, did what was reasonable to meet its obligations,” consistent with the approach taken by the Agency and the courts that “the statutory obligations of a rail transport carrier are not absolute – they are in fact pervaded by the test of reasonableness in all the circumstances.” [emphasis in the original]

[113] CN maintains that the burden placed upon the railway company in respect of the carriage of traffic is an average one and that, in times of shortage, it is what is, on average, reasonable that must be looked at from the standpoint of car supply. Based on this, CN maintains that it has acted adequately and reasonably given the extraordinary circumstances that arose during the 2013-2014 crop year.

[114] CN also argues that even if one were to elevate CN’s guideline provided to RIL as some form of commitment, it would be unreasonable to find CN in breach of that commitment for a relatively minor variance from that standard and even if CN missed its spotting target by redacted percent, that does not support a finding of a service breach.

[115] In addition to having previously stated that a 300 car reduction imposed on it by CN represents the immediate financial consequence of approximately redacted in lost sales being reassigned to another shipper, RIL considers CN’s allegation that it failed only to fulfill the allocation commitment by redacted percent to be inaccurate and misleading. RIL submits that, according to RIL’s originally submitted calculations up to week 43, it was shorted 2,478 rail cars out of redacted rail cars that should have been provided to RIL – with CN failing to fulfill the allocation commitment by nearly redacted percent. RIL states that it was not receiving only redacted percent less than it needed or wanted: the allocation commitment was already considerably less than its actual needs and accordingly, CN’s service failure is much more significant than the “relatively minor variance” that it alleges.

Analysis and finding

[116] In Step 1 of the Evaluation Approach, the Agency determined that the reasonable service request that CN had to fulfill was spotting at RIL’s facilities of redacted percent of CN’s weekly car spots.

[117] The Agency acknowledges that the complexities of the grain handling system might create situations where it is not reasonable to expect that a railway company will be able to spot the exact car numbers representing each shipper’s market share week-over-week. Some flexibility must be given to railway companies for reasonable variance in the delivery of cars, provided that such flexibility does not result in a given shipper receiving fewer cars than its market share over a specified period. Therefore, in determining whether CN fulfilled RIL’s service request in relation to RIL’s market share of redacted percent, the Agency will assess the service levels on a weekly basis, but also on the basis of the average monthly and whole period service levels.

[118] For each week from grain week 23 to 47, the Agency has compared the total number of cars actually spotted to RIL each week, against RIL’s car spot entitlement based on a redacted percent allocation of CN’s Average Total Weekly Car Spots. From this comparison, the Agency calculated the percentage of market share fulfilled by the number of cars actually spotted to RIL and the number of cars under or over the entitlement on a weekly, monthly and whole period basis.

[119] This analysis indicates that the numbers of cars actually spotted to RIL failed to meet redacted percent of CN’s total car supply 21 out of 25 weeks (84 percent of the period). CN’s service to RIL also failed on the basis of a monthly average to meet redacted percent of CN’s total car supply for all the months of the application period, January through June 2014, and on the basis of a whole period average. The Agency calculates the number of rail cars represented by this shortfall to be 2,891 over the whole period. A table detailing the Agency’s analysis can be found in the confidential appendix to this Decision.

[120] The Agency considers that a service shortfall in an environment in which cars are being rationed on a percentage of CN’s car spots, and in which a shipper’s actual service demands are, accordingly, already constrained, is not the same as a service shortfall in a normal, unrationed service environment. More than simply an unfulfilled demand, a service shortfall under a historical market share rationing regime represents the erosion and displacement of the aggrieved shipper’s market share, which, in this case, cumulatively represented a significant number of rail cars, spanned an extended period of time and reduced RIL’s market share overall by redacted percent.

[121] Therefore, with respect to the spotting of redacted percent of CN’s Average Total Weekly Car Spots, using CN’s unadjusted Average Total Weekly Car Spots numbers, the Agency determines that CN has not fulfilled RIL’s service request for the period from grain week 23 to 47 of the 2013-2014 crop year.

ii) 300 car reduction

Positions of the parties

[122] RIL alleges that CN breached its statutory level of service obligations by further reducing RIL’s rail car allocation by approximately 300 cars during the week of May 18 to 24, 2014 and every third week thereafter in order to meet its obligations under the LDC Interim Order.

[123] CN submits that it was compelled, as a result of the LDC Interim Order and an arbitration decision, to provide RIL with less than its anticipated allocation percentage because other shippers were granted a guaranteed number of rail cars irrespective of CN’s established rationing methodology. CN states that these factors had a redacted percent impact on its historical allocations, based on an offering of 5,000 cars per week.

[124] According to CN, those orders requiring CN to provide shippers with a fixed number of cars cause such shippers to be carved out of the allocation process and receive cars “off the top” and, as a result, reduce the remaining number of cars available for allocation and the percentage of cars initially targeted for allocation to the rest of the shippers. CN maintains that it requires flexibility to take those orders into account and adjust the allocation accordingly.

[125] RIL submits that the cars delivered pursuant to the LDC Interim Order were not taken “off‑the‑top” of CN’s car supply for all shippers, but were instead taken directly out of individual shippers’ allocations and that CN unilaterally forced RIL to assume an arbitrary 33.3 percent of the reduction in car allocation to shippers other than the shipper involved in the LDC Interim Order, as evidenced by a chain of e‑mails between CN and RIL (referred to earlier in this Decision at paragraph 45).

Analysis and finding

[126] CN asserts that, in order to deal with impact of the regulatory orders it refers to, the cars guaranteed to the shippers involved must be taken “off the top” of the total car supply, which it submits reduces the number of cars available for allocation and the percentage of cars initially targeted for allocation to the other remaining shippers.

[127] In general terms, although the Agency recognizes that cars taken “off the top” will result in fewer cars to distribute amongst the remaining shippers, the Agency fails to see how that would cause a reduction in the percentage allocation of those remaining shippers. In fact, if shippers receiving a guaranteed car supply are “carved out of the allocation process” as CN suggests, the portion of their historical market share allocation represented by that car supply should be redistributed amongst the shippers remaining in the rationing pool. A redistributed market share of this nature would actually provide the remaining shippers with a greater percentage allocation, albeit of a smaller number of cars.

[128] However in this case, RIL filed e‑mail correspondence between CN and RIL dated May 8, 2014, in which CN indicated that until CN is relieved from the LDC Interim Order, RIL should expect its allocation to be reduced by approximately 300 cars below its shipping percentage once every three weeks. CN did not deny or refute this evidence.

[129] This car reduction is a fixed number of cars. It is not a number of cars that varies with CN’s Average Total Weekly Car Spots. Therefore, this reduction could not possibly have been proportionate to RIL’s market share. Clearly, CN arbitrarily decided that RIL would be subject to a fixed car reduction irrespective of what RIL’s fair share of the reduction actually ought to have been under a market share-based rationing methodology. In doing so, CN treated RIL unfairly.

[130] Accordingly, the Agency finds that the fixed car reduction approach adopted by CN to offset the impact of the LDC Interim Order on its car allocation is wrong in principle. RIL’s service requirements were already constrained as a result of CN’s need to implement car rationing. They should not have been further constrained by a car reduction that had no relation to RIL’s market share. Given that a railway company is under an obligation to provide adequate and suitable service to all grain shippers, regardless of size, wherever located, such differential treatment of a shipper like RIL is sufficient on its own to constitute a breach of level of service obligations.

[131] Therefore, the Agency finds that CN breached its statutory level of service obligations to RIL, by specifically targeting it for fixed car reductions instead of reductions based on its market share. Based on the evidence, CN’s reduction of RIL’s share by a fixed number of cars irrespective of RIL’s market share was arbitrary and unreasonable. It did not represent a fair and equitable application of CN’s own historical market share-based car rationing program, nor was it representative of RIL’s redacted percent share of the total pool of cars.

STEP 3: IF NOT, ARE THERE REASONS WHICH COULD JUSTIFY THE SERVICE FAILURE?

[132] In the October 3 Decision, the Agency stated:

[48] Pursuant to the CTA, a federal railway company must receive, carry and deliver all traffic offered for carriage “according to its powers.” This obligation is not, however, absolute under all conditions. A railway company is not called upon to perform the unreasonable or the impossible. For this reason, where the Agency finds that a railway company has failed to respond to the reasonable request of a shipper, the Agency will turn its attention to the justifications offered by the railway company for this failure.

[133] In this case, CN submits that even if it had not met the allocation target, it has provided adequate and suitable accommodation and advances several explanations to justify the level of service it provided to RIL during the period under examination. These are related to CN’s need for flexibility to react to changing circumstances, its limited access to resources, the overall service by CN to the grain industry and RIL, the finite capacity of the system, and CN’s obligation to other shippers.

1. THE NEED FOR FLEXIBILITY TO REACT TO CHANGING CIRCUMSTANCES

Positions of the parties

CN

[134] CN’s position is that a railway company must have the flexibility to make adjustments to its car supply in order to be able to adapt to shifting priorities and changing circumstances. CN contends this need for flexibility was particularly obvious during the extraordinary circumstances of the 2013-2014 crop year and refers to a number of adjustments it was required to make. In addition to the impact of certain regulatory orders previously discussed, these include: the acquisition of elevator capacity by RIL; the acquisition of additional terminal capacity by another shipper; and the demands of a greater number of producer-shippers.

[135] CN maintains that the 2013 acquisition by RIL of Viterra Inc. assets, which occurred after the period covered by grain weeks 8 to 22 of the 2012-2013 crop year, resulted in the most significant adjustment to its rationing methodology that CN was required to make. CN submits that it took the historical shipping volumes of RIL’s newly acquired assets into account when determining RIL’s proportionate historical share, and that this is illustrative of how RIL was the primary beneficiary of the need for flexibility.

[136] CN states that during the course of the 2013-2014 crop year, an existing unidentified CN grain shipper acquired additional west coast terminal capacity and, in recognition of that investment and expanded infrastructure, CN took steps to increase that shipper’s allocation percentage by an unspecified amount, to more accurately reflect its shipping capabilities.

[137] CN also states that during the 2013-2014 crop year, similar to other shippers, producers using producer cars to market grain outside the primary elevator system required significantly more rail cars than in previous years. To account for this, CN took a proactive measure and increased the historical share of producer cars by approximately one percent for the October to June period. CN acknowledges that this reduced RIL’s allocation slightly, but does not consider this discriminatory, but rather a proper, rational and fair method of allocating cars in accordance with the intent of the CTA and in the context of the 2013-2014 crop year.

[138] According to CN, rather than adjusting for these factors by simply taking from the historical allocation of the currently available hopper cars, it instead obtained additional capacity. CN states that in September 2013, it specifically acquired an additional 499 hopper cars in recognition of the huge crop being harvested and the unspecified shipper’s acquisition of an additional terminal facility. CN also states that it added an additional 869 hopper cars to its fleet in the spring of 2014 in recognition of the high demand for cars to move the historic grain crop. CN adds that in recent weeks it further increased its surge capacity by temporarily repositioning cars from its U.S. operations to western Canada, during a seasonal lull in demand from U.S. grain shippers.

[139] CN states that these additional cars were brought in to address special circumstances that occurred after the initial CN rationing process started in grain week 8, and that RIL has assumed that it is entitled to receive redacted percent of these cars acquired after the initial allocation had been set, just as it was entitled to CN’s base fleet. CN considers it commercially unreasonable for RIL to not recognize any CN discretion as to how the additional cars should be distributed and to require that any incremental capacity acquired after grain week 9 be distributed on the exact same historical percentage set by CN on grain week 9, regardless of any change in capacity or any other circumstances for shippers other than RIL.

[140] CN asserts that it has consistently followed its rationing guidelines since the beginning of grain week 8 so as to achieve a fair and consistent treatment of all shippers, including RIL, under the extreme circumstances where car order requests far exceeded reasonable estimates of system capacity.

RIL

[141] RIL disputes CN’s contention that CN needed to make adjustments to address changes in circumstances during the crop year, which rendered the limited service it provided to RIL “adequate and suitable” in the circumstances. RIL maintains that the circumstances raised by CN were already taken into account in RIL’s redacted percent allocation; did not result in an adjustment; or were reflective of CN’s arbitrary and discriminatory preference to provide rail cars and market share to RIL’s competitors.

[142] Specifically, RIL submits that CN made it clear to RIL that RIL’s acquisition of elevator capacity on May 1, 2013 had already been taken into account before CN committed to a redacted percent allocation for RIL. RIL adds that CN’s statement that an adjustment was needed to the number of producer cars for the October to June period suggests that this was an adjustment made by CN prior to determining what each of its various shippers’ shares would be and not an adjustment made after CN communicated to RIL that its share would be redacted percent. RIL asserts that CN has provided no evidence that it adjusted RIL’s allocation percentage downward during the crop year to account for an increase in producer cars, nor was any such adjustment ever communicated to RIL.

[143] RIL disputes CN’s allegation that an adjustment was required to accommodate the acquisition of additional capacity by another shipper. RIL argues that CN has provided no evidence as to who the shipper was; what amount of terminal capacity the shipper acquired and when; whether it was new capacity or existing capacity that changed hands; how that affected the shipper’s shipping capabilities; or how an adjustment to that shipper’s allocation affected RIL’s percentage allocation. RIL submits that any such adjustment was never communicated to RIL and it maintains that CN does not provide any evidence to support its allegation that providing cars to this other shipper was the reason CN failed to fulfill its commitment to RIL. RIL also asserts that it is not CN’s responsibility to arbitrarily and unilaterally determine the market share for each grain shipper. RIL argues that, in any event, drawing from the allocation commitment to RIL in order to award it to one of RIL’s competitors is discriminatory.

[144] In response to CN’s allegation that the additional cars it added in September 2013 and in the spring of 2014 should be excluded from the allocation calculation, RIL submits that the cars acquired in September 2013 were part of CN’s fleet when CN made its allocation commitment to RIL.RIL states that CN could have expressly stated any such exclusion if its intention was to maintain “discretion as to how the additional cars that were acquired should be distributed” and, similarly, CN could have pointed out that RIL was not entitled to redacted percent of these additional cars when responding to RIL’s numerous complaints. RIL contends that the evidence before the Agency clearly indicates that the redacted percent allocation was to be calculated based on CN’s total weekly car allocation.

Analysis and finding

[145] CN itemizes three specific changes of circumstance that it required flexibility to deal with and to which it responded by increasing its car fleet, first in September 2013, with the addition of 499 hopper cars, in the spring of 2014 with the addition of 869 hopper cars and later in the period, by temporarily repositioning an unspecified number of cars.

[146] Essentially, CN claims that given its need for flexibility, this additional capacity should not necessarily be subject to the same rationing methodology as its “base fleet” and that CN should be allowed the discretion to allocate this additional capacity as it sees fit.

[147] The Agency acknowledges that each of these changed circumstances would require CN to exercise some flexibility to make adjustments in its calculation of historical market share allocations. However, CN’s acquisition of cars in September 2013 to help address the huge harvest and the acquisition by an unnamed shipper of additional terminal capacity precedes its implementation of rationing. Likewise, CN refers to the adjustment it made to account for an anticipated increase in producer car demand from October to June as a proactive measure, which is by definition taken in advance, not reactively. Finally, CN submits that the adjustment required to take into account RIL’s acquisition of elevator capacity from Viterra Inc. was included in its calculation of RIL’s proportionate share of the car supply. The Agency finds that these three circumstances were known at the time the shippers’ market shares were determined by CN and, therefore, do not provide CN with justification for its service failure to RIL.

[148] The Agency also acknowledges that it was commercially responsible on CN’s part to acquire additional hopper cars in September 2013 and the spring of 2014 to help address the extraordinary situation of the 2013-2014 crop year. However, CN states that it is already using its general fleet to deliver regulatory order cars, which are “taken off the top” and no reason was given to justify that additional capacity acquired in the last crop year should be dedicated to any specific service instead of being used for the benefit of all shippers. The Agency sees no basis, in a rationed car supply, justifying any differentiation between cars newly acquired and the base fleet at the beginning of the crop year. Consequently, the Agency finds that CN cannot justify its failure to provide RIL with redacted percent of CN’s Average Total Weekly Car Spots by claiming that some of these cars were additional capacity acquired by CN for uses other than for the benefit of all shippers in the rationing pool.

[149] The Agency recognizes the need for flexibility in the grain handling system. However, CN’s rationing methodology is based on percentages of a weekly service offering, the size of which is in CN’s control. Therefore, the Agency finds that CN’s rationing methodology already integrates a sufficient degree of flexibility.

2. LIMITED ACCESS TO ADDITIONAL RESOURCES

Positions of the parties

CN

[150] CN maintains that it has taken all commercially reasonable steps to move the maximum amount of grain for the remainder of the 2013-2014 crop year and for 2014-2015. CN states that in addition to acquiring the additional hopper cars mentioned previously and initiating the FIP program, in 2013 it added 81 high power locomotives to a fleet of 1,250 and will be adding 60 more before the end of 2014.  In addition, CN overhauled 200 locomotive units in 2013 and 250 in 2014. CN also states that it has undertaken significant recruitment efforts, including the hiring of 2,700 additional conductors in 2013 and 2014, of which 1,500 will be located in western Canada.

[151] CN contends that RIL’s application presupposes that CN can simply acquire additional rolling stock to move more western grain. CN asserts that this is not a practical commercial option for any railway company in North America.

[152] CN points out that there is typically a four to six month period between ordering and taking delivery of hopper cars but at the present time there are no hopper cars available in the North American lease market until the spring of 2015 at the earliest. CN contends that this is further confirmed by the difficulty RIL and other grain shippers have experienced in obtaining hopper cars for the FIP program.

[153] Concerning motive power, CN states that there is normally a 10- to 12-month period required between order and delivery, however currently the two main manufacturers in North America are unable to supply any more locomotives for at least 24 months (until 2016).

[154] As for crews, CN indicates that it typically takes a minimum of nine months to recruit and properly train qualified conductors but it is exceedingly difficult to recruit any more crews in the Prairies due to low unemployment rates and fierce competition for employees with large oil and gas companies.

[155] CN submits that all assets for the 2014-2015 crop year have been deployed and all available human resources have been hired and trained. It indicates that although its planning process and resource commitment have allowed it to be broadly in synch with waterfront elevator capacity to be able to handle surges in demand in the fall and the spring, no additional or excess grain car capacity is being held in reserve.

RIL

[156] Though RIL challenges CN’s arguments about limited resources, RIL ultimately submits that, in any event, the application is not in relation to a defined number of rail cars, but rather to the percentage of CN’s total car allocation that was committed to RIL. Therefore, RIL considers CN’s failure to obtain more rail cars or additional employees irrelevant to CN’s ability to provide RIL with redacted percent of its total car allocation. RIL contends that factors affecting CN’s overall car supply, including fleet or human resource limitations or extreme weather, should not affect RIL’s percentage of that overall car supply, nor should they otherwise affect RIL disproportionately.

Analysis and finding

[157] In order to maintain a properly functioning demand-driven grain handling and transportation system in Canada, railway companies must ensure that the rail system keeps pace with the growth of the grain industry, that is, with increases in production and other elements in the supply chain, such as country elevator and port terminal capacities.

[158] That being said, the Agency recognizes that the rail cars, motive power and work force required in the movement of grain by rail cannot be instantaneously acquired and that the planning horizon for increasing rail capacity is longer than a matter of weeks. The Agency also acknowledges CN’s efforts to increase capacity in response to the demands of the 2013-2014 crop year, even though, in view of the fact that rationing was still ultimately required, it is also apparent that those efforts were insufficient to accommodate all of the increased demand. However, the Agency finds that any issues with capacity acquisition have no bearing on a rationing program based on percentage allocations and do not justify its faulty implementation.

3. SERVICE IMPROVEMENTS AND FINITE CAPACITY

Positions of the parties

CN

[159] CN submits that it is currently transporting record levels of Canadian grain and that its transportation of western Canadian grain in the 2013-2014 crop year has surpassed its prior historical records. To illustrate this CN points out that its June 2014 average of 5,544 carloads per week is 75 percent higher than its eight year historical average and 37 percent higher than its best June ever. CN adds that, at the time of its submission, its crop year to date grain volumes are 13 percent better than its previous best and 22 percent above average performance. It also submits that this record setting performance would have been higher, had it not been for the failure of grain companies to use available rail capacity in August and early September of 2013.

[160] With specific reference to RIL, CN submits that RIL has received more cars than any other shipper in this crop year and since grain week 33 has received no fewer than 1,300 cars per week on average and more than 1,650 cars in two of those weeks. CN adds that ‘its movements from the elevators RIL owned prior to those newly acquired in 2013 significantly exceeds what has been moved from those elevators in grain weeks 1 to 48 of any of the past five crop years and represents a 19 percent increase over last year and a 13 percent increase over the previous highest grain movement by RIL on CN in crop year 2011-2012.

[161] CN maintains that recent railway performance to the west coast ports and Thunder Bay is testing the limits of these supply chains. CN contends that this means there is little doubt that it is now a zero sum game and any additional service that CN is mandated to give one shipper must necessarily come at the expense of another shipper or shippers and that it is a question of how total capacity is allocated to meet demand. CN filed a graph to illustrate its claim that it is not realistic to expect CN to spot more cars and that moving any more grain is not possible on a sustained basis without additional waterfront elevator capacity.

RIL

[162] RIL disputes CN’s arguments but contends that, in any event, CN’s level of service to RIL, now or on average over the entire crop year, is not relevant, as the Agency held in Decision No. 323‑R-2002, Naber Seed & Grain Co. Ltd. v. CN, that it would not be consistent with the level of service provisions if a railway company could breach its service obligations but then escape any sanction by simply improving its service.

[163] With respect to CN’s supply chain claims, RIL submits that CN has not led any evidence with respect to:

  • the inability of the grain supply chain to handle the amount of grain that producers and grain companies were attempting to ship in September and October 2013;
  • CN’s estimate of the maximum supply chain capacity; or
  • waterfront elevator capacity being exhausted.

[164] RIL maintains that the only capacity constraints it faced in relation to purchasing grain from producers at its CN-serviced elevators was the lack of rail cars, and that it had significant excess capacity at port terminal facilities throughout the application period.

Analysis and finding

[165] CN submits that it has delivered record service to the grain industry during the 2013-2014 crop year; that RIL has received more cars than any other shipper; and that CN’s service to RIL in 2013-2014 is higher than it has ever been in the past.

[166] As set out below, at paragraph 31 of the October 3 Decision, the Agency stated that it evaluates the service provided by a railway company to an individual shipper on a case-by-case basis, not on the basis of the level of service being provided to the industry as a whole, or the level of service provided to that shipper historically:

[31] As the level of service provisions are remedial on a case-by-case basis, their purpose cannot be achieved, for example, by assessing a railway company’s compliance with its level of service obligations using a benchmark expressed in relation to its overall average levels of service to all shippers across the network or based on “historical levels” when it has been demonstrated that a shipper’s needs have not been accommodated. For the Agency to be satisfied that a railway company has not breached its level of service obligations, the railway company must bring before it application-specific evidence of the efforts it has made to furnish adequate and suitable accommodation for the movement of the shipper’s traffic or it must provide compelling reasons why the shipper’s request cannot be reasonably accommodated.

[167] Therefore, the fact that CN exceeded its past service levels to the industry and to RIL specifically are not relevant to the case at hand and do not justify the service failure at issue.

[168] The Agency is of the opinion that, even assuming that CN faced the supply chain challenges that it claims, this does not constitute any justification as to why CN did not provide RIL’s share of CN’s Average Total Weekly Car Spots, however limited that weekly spotting may have been in weeks where CN faced supply chain challenges.

4. OBLIGATIONS TO OTHER SHIPPERS

Positions of the parties

CN

[169] CN submits that section 112 of the CTA requires that any condition of service established by the Agency under Division IV (which includes the level of service provisions) be “commercially fair and reasonable to all parties” [emphasis in the original]. CN considers this to effectively mean that when making an order in this application, the Agency must have regard to the impact on other grain shippers.

[170] CN argues that RIL’s request for relief would have an obvious and deleterious impact on the other grain shippers served by CN.

[171] CN’s position is that regulatory orders, which grant a guaranteed car supply to certain shippers, provide them with a “super priority” rail service that cannot be likewise afforded to other shippers. This, according to CN, undermines CN’s reasoned and equitable rationing methodology. CN contends that if one shipper is awarded more of the total car supply than it would otherwise be entitled to under the rationing methodology, then the number of cars provided to other shippers must correspondingly be reduced.

[172] CN argues that this creates a vicious cycle of regulatory intervention because, with each order granted, fewer cars remain available for the remainder of CN’s shippers, who will be compelled to seek their own regulatory orders.

RIL

[173] RIL submits that the words “all parties” in section 112 of the CTA do not include all grain shippers in the circumstances of a level of service application between one grain shipper and one railway company, and any order made by the Agency with respect to this matter does not have to be “commercially fair and reasonable” to anyone other than the parties to the application. RIL considers that for the Agency to hold otherwise would be inconsistent with Decision No. LET‑R‑34‑2014, in which the Agency held that the fact that RIL is being affected by actions which CN says it was compelled to take by virtue of an interim order in an application by another shipper did not constitute a direct interest in that application sufficient to accord intervener status to RIL.

[174] RIL considers that it would be contrary to sections 113 to 115 of the CTA to treat contracts with one shipper as reducing the railway company’s statutory service obligations to other shippers or, conversely, to treat obligations to other shippers as reducing the railway company’s statutory service obligations to one shipper. RIL submits that, in this case, RIL is entitled to expect CN to fulfill its commitment to provide redacted percent of its total car allocation to RIL. As far as RIL is concerned, if CN is making so many commitments that it is unable to live up to them, it must either increase its capacity so as to be able to fulfill its commitments or it must pay the consequences of breaching the commitments it has made.

Analysis and finding

[175] While the Agency deals with level of service applications on a case-by-case basis, it cannot do so without regard to the overall service obligations that railway companies have to shippers across the rail network. The Agency recognizes that railway companies have an obligation to all shippers, and that is why rationing was used during the application period, so that all shippers would be treated fairly and equitably in receiving a portion of their actual service demand.

[176] That being said, however fair and equitable a method of rationing is in principle, a railway company may be in breach of its level of service obligations if that method is not implemented fairly and consistently. In this case, RIL received less than its share, which would mean that other shippers received cars that should have gone to RIL. This cannot be invoked by CN as justification for its failure to deliver to RIL its proportionate share of the car supply.

[177] The Agency has held in the past that service to other shippers does not absolve a railway company from its level of service obligation to a specific individual shipper.

[178] As the Agency stated at paragraph 184 of the October 3 Decision:

[184] Providing service to other shippers is not, in and of itself, a justification for a service failure to a shipper. Should CN choose to fulfill its level of service obligations to LDC by reducing the service it provides to other shippers, it may be doing so in violation of sections 113 to 115 of the CTA, with respect to those affected shippers. CN would therefore, on application by an affected shipper, be exposed to the Agency ordering remedies under section 116 of the CTA.

[179] Consequently, the Agency cannot accept CN’s argument with respect to its obligations to other shippers generally as justification for CN’s failure to deliver the cars RIL should have received under CN’s own rationing methodology and pursuant to its own representations to RIL. Also, the Agency finds that penalizing individual shippers through car supply reductions to account for regulatory orders does not constitute an appropriate justification for railway service lapses.

CONCLUSION

[180] In examining whether CN breached its level of service obligations to RIL using its three-step Evaluation Approach, the Agency finds that:

Step 1: With its actual service requirements constrained by car rationing, RIL’s service request to receive service at a level that met the historical shipping percentage allocation imposed on it by CN in its car rationing methodology, that is, redacted percent of CN’s total available car supply, constitutes a reasonable service request. This is reinforced by RIL’s need for predictable and reliable service to plan its operations and purchase and sales programs.

Step 2: CN has not fulfilled RIL’s service request for grain weeks 23 to 47 of the 2013-2014 crop year. During grain weeks 40 to 47, CN further breached its level of service obligation to RIL by subjecting it to inequitable treatment by reducing the cars available to it by an arbitrary number unrelated to its market share.

Step 3: CN did not establish reasons that would justify the service failures identified in Step 2.

[181] The Agency therefore finds that CN has breached its statutory level of service obligations to RIL. Having made that finding, the Agency must next consider the remedy in this case.

REMEDY

[182] Given the statutory breaches identified by the Agency in this case, it is clear that there were problems inherent in the implementation of CN’s car rationing methodology. Accordingly, in determining an appropriate remedy for these breaches, the Agency must explore how best to cure these operational defects. This necessarily involves consideration of the general principles that should apply to the implementation of a car rationing methodology, such as the one used by CN in this case.

[183] Firstly, the Agency acknowledges that, whatever the total size of the car fleet, 100 percent of the cars available to a railway company will not necessarily be available for general distribution by rationing. The Agency recognizes that there are portions of the total grain hopper car fleet that may be committed elsewhere, for example, FIP cars and cars committed through regulatory or arbitral means. While these commitments do not reduce a railway company’s obligation to other shippers, they do raise the difficult questions of how to manage an inadequate car supply that is comprised of both guaranteed cars and cars available for rationing, and how to minimize the impact of such a situation on a rationed shipper.

[184] When a railway company is confronted by a situation where it does not have the capacity to meet the demands of its shippers and decides to implement a car rationing program, it is expected that the railway company will, on a priority basis, make a concerted effort to expand its capacity as quickly as possible, in order to minimize the duration and impact of rationing on affected shippers.

[185] If a railway company must implement a car rationing program, the keys to the implementation of a fair rationing methodology are:

  1. a consistent methodology for reporting what constitutes the “total available car supply,” and
  2. proper and precise communication of the total number of cars that any rationed shipper can expect, so it can plan its business accordingly.

[186] To meet the transparency and notice obligations of rail service providers and to meet shippers’ needs for reliable and predictable service and avoid misunderstandings, the pool of cars available for general distribution by rationing should be communicated to all shippers that will be impacted by rationing. If any cars are to be excluded from the total pool, this should be clearly indicated so that the actual pool of cars available for allocation is known. Furthermore, if a historical market share rationing method is being used, the proportion of the market share that would otherwise belong to shippers receiving a guaranteed car supply should be redistributed amongst those shippers reliant on the rationed general distribution car supply.

[187] To reconcile a railway company’s need to manage its car fleet with its fundamental statutory obligations under the CTA, the Agency sets out the following general principles that should guide any rationing regime:

  • Rationing should be a last resort for dealing with unexpected demand surges. Railway companies have an ongoing obligation to ensure that rail capacity stays in synch with grain industry growth trends and throughput capacity. Railway companies should make arrangements in advance for ready access to a reasonable supply of surge capacity, secured and available at times that match the rhythm of the Canadian grain market. A rationing methodology does not constitute an alternative to an appropriate level of service nor does the existence of the methodology excuse a railway company’s failure to adequately maintain appropriate capacity to meet shippers’ reasonable demands.
  • Rationing should be implemented, temporarily, and for as short a time as possible; and a railway company should, throughout its duration, make all reasonable efforts to return to normal service (i.e., no rationing) as soon as possible.
  • Any rationing methodology must be fair and must be consistently and transparently applied. This should entail consultation, input, and, ideally, agreement from industry on what method should be adopted, the criteria that should be taken into consideration to arrive at that method and the timing of its implementation. The method adopted must be clearly communicated to all affected participants in the supply chain. The rationing methodology communicated to shippers should state a reasonable rolling average that will be used, i.e., a performance standard. A railway company may not be able to spot the exact number of cars each week, however as long as on average over a period of a small number of weeks agreed to with affected shippers, it meets its targets, it will have fulfilled its commitments.
  • Once implemented, a car rationing methodology should also be open to scrutiny and verification. Shippers should be kept informed, not only because they have a right to assess whether they are being treated fairly, but also because their business planning decisions rely on accuracy and predictability. There should be both forward and backward looking measures for car supply and communication protocols that ensure this information is available to affected parties.
  • Forward-looking communication to individual shippers should provide written advice about: when rationing is in effect; the methodology being applied to allocate car supply; what the shipper’s historical market share is (if that is the method being used); details of how the market share was calculated; any subsequent changes to market share resulting from market share redistribution; and an estimate of the date when “normal” service (i.e., no rationing) is expected to be restored.
  • In addition, in advance of a given crop week, prior to car order deadlines, individual shippers should be notified in writing about the number of general distribution cars available for allocation by market share that week, as well as the total number of cars to be allocated by all means.
  • Backward-looking or performance-monitoring communication to industry should provide weekly and cumulative reporting on a railway company’s Web site during periods of rationing indicating: that rationing is in effect; the methodology employed; whether a recalculation of historical market shares was required (if that is the method being used); and the total number of cars spotted and the number of general distribution cars spotted via rationing in the previous week.

[188] The Agency’ is of the opinion that, having regard to the breaches identified,  these principles are relevant considerations in determining the appropriate remedy in this case and as guidance in the design and implementation of capacity rationing programs by railway companies generally.

[189] However, for greater clarity, this application, as articulated by RIL, only required the Agency to assess CN’s performance against CN’s selected methodology for rationing cars for crop year 2013-2014. Therefore, the Agency did not assess whether the method used by CN was consistent with the principles enunciated above. The Agency only investigated CN’s implementation of the methodology that it had chosen. Therefore, validation of the selection and design of the methodology used by CN during the period reviewed in this Decision is outside the scope of the Decision, and the Agency therefore makes no finding in this regard.

ORDER

[190] CN is ordered for each week during which CN is rationing cars using historical market share:

  1. To deliver to RIL the number of cars representing RIL’s market share of CN’s weekly car spots. RIL’s market share is to be recalculated using only those shippers who are participating in the general allocation rationing pool. The weekly spotted cars to which RIL’s market share is to be applied (i.e., the general allocation rationing pool) is defined as all of CN’s covered hopper car fleet spotted each week, after having taken off the top any fixed amount of cars to be spotted to specific shippers under CN’s FIP or an Agency or arbitration decision.
  2. To implement between itself and RIL the following communication protocols:
  • Prior to the onset of rationing, CN is to provide RIL with written notice about:
  • when rationing is in effect;
  • the methodology being applied to allocate car supply;
  • what RIL’s historical market share is;
  • details of how the market share was calculated;
  • the performance standard CN is committed to meet, i.e., the reasonable rolling average that CN will attain, and
  • an estimate of the date when “normal” service (i.e., no rationing) is expected to be restored;
  • If there is a change to RIL’s historical market share due to any form of adjustment, CN is to without delay provide RIL with written notice explaining:
  • why the change occurred; and
  • what RIL’s adjusted market share is;
  • In advance of a given crop week, prior to car order deadlines, CN is to provide RIL with written notice about:
  • the number of general distribution cars available for allocation by market share that week; and
  • the total number of cars to be allocated by all means.
  • CN is to provide RIL on a weekly basis with a written, performance-monitoring report indicating for the previous week:
  • if rationing was in effect;
  • the market share applicable to RIL;
  • the number of cars received by RIL and the market share those cars represent; and
  • the total number of cars spotted and the number of general distribution cars spotted via rationing.

[191] Further, the Agency orders CN to restore to RIL a number of rail cars equal to the cumulative shortfall of rail cars spotted by CN to RIL from grain weeks 23 to 47 of the 2013-2014 crop year, based on an entitlement for RIL of redacted percent of CN’s Average Total Weekly Car Spots, adjusted to reflect cars that were not available for the general allocation rationing pool. As a result of its evaluation of the evidence on file, the Agency has estimated this service shortfall to be 2,891 rail cars as of June 28, 2014.

[192] CN is required to show cause, by January 9, 2015, why the Agency should not order CN to make up a shortfall in this amount (2,891 rail cars), by providing the actual number of FIP cars and LDC Interim Order and arbitration decision cars spotted each week that are included in CN’s Average Total Weekly Car Spots data on file for grain weeks 23 to 47 of the 2013-2014 crop year, as well as specifying the number of FIP cars spotted to RIL weekly during the same period. CN is also to provide any information relative to any adjustments that may be required to account for any reduction in the shortfall to RIL that may have already taken place. CN is also required to propose a schedule for making up the shortfall, taking into consideration RIL’s requirements for service, while mitigating the impact on other shippers.

[193] RIL will have until January 16, 2015 to comment on CN’s submission and CN will have until January 22, 2015 to respond to RIL’s comments.

This is a public redacted version of a confidential decision that issued on December 18, 2014 which cannot be made publicly available.

Member(s)

Geoffrey C. Hare
Raymon J. Kaduck
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