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Rail Freight Service Review TP 15042 (01/2011) Rail Freight Service Review FINAL REPORT January 2011 Please direct your comments, orders and inquiries to: The Order Desk Multimedia Products and Services Transport Canada (AARA-MPS) 2655 Lancaster Road Ottawa ON K1B 4L5 Telephone: 1-888-830-4911 (in North America) 613-991-4071 (other countries) Fax: 613-991-1653 E-Mail: [email protected] © Her Majesty the Queen in Right of Canada, as represented by the Minister of Transport, 2010. Permission is granted by the Department of Transport, Canada, to copy and/or reproduce the contents of this publication in whole or in part provided that full acknowledgment is given to the Department of Transport, Canada, and that the material be accurately reproduced. While use of this material has been authorized, the Department of Transport, Canada, shall not be responsible for the manner in which the information is presented, nor for any interpretations thereof. The information in this publication is to be considered solely as a guide and should not be quoted as or considered to be a legal authority. It may become obsolete in whole or in part at any time without notice. ISBN: 978-1-100-51891-6 Catalogue No.: T42-3/2-2011 TP 15042 (01/2011) TC-1004219 *TC-1004219* i TABLE OF CONTENTS 1. INTRODUCTION ....................................................................................... 1 1.1 RATIONALE ...................................................................................................................... 1 1.2 PANEL MANDATE ........................................................................................................... 2 1.2.1 The Panel’s Terms of Reference .............................................................................................3 1.3 PANEL PROCESS .............................................................................................................. 3 2. CURRENT REGULATORY FRAMEWORK ................................................ 5 2.1 TRANSPORTATION POLICY STATEMENT ................................................................... 5 2.2 LEVEL OF SERVICE .......................................................................................................... 6 2.3 COMPETITIVE ACCESS PROVISIONS ......................................................................... 7 2.4 FINAL OFFER ARBITRATION ........................................................................................ 8 2.5 ANCILLARY CHARGES ................................................................................................... 8 2.6 RUNNING RIGHTS ......................................................................................................... 9 2.7 COMMERCIAL MECHANISMS ....................................................................................... 9 3. SUMMARY OF PHASE I RESEARCH ....................................................... 11 3.1 ANALYSIS OF RAILWAY FULFILLMENT OF SHIPPER DEMAND AND TRANSIT TIMES ............................................................................................................ 11 3.2 DESCRIPTION OF CANADA’S RAIL-BASED FREIGHT LOGISTICS SYSTEM ......... 14 3.4 SURVEY OF SHIPPERS ................................................................................................... 16 3.5 SURVEY OF OTHER STAKEHOLDERS: TERMINAL OPERATORS, PORTS AND SHIPPING LINES ..................................................................................... 17 3.6 SERVICE ISSUES IN REGULATED INDUSTRIES OTHER THAN CANADIAN RAIL FREIGHT INDUSTRY .................................................................... 18 ii 4. KEY ISSUES AND SOLUTIONS IDENTIFIED BY STAKEHOLDERS .... 19 4.1 STAKEHOLDER COMMENTARY PRIOR TO THE INTERIM REPORT ...................... 19 4.1.1 Key Issues Identified By Non-Railway Stakeholders ............................................................20 4.1.2 Key Solutions Identified By Non-Railway Stakeholders ......................................................25 4.1.3 Key Issues and Solutions Identified by CN and CP .............................................................29 4.2 STAKEHOLDER COMMENTARY IN RESPONSE TO INTERIM REPORT .................. 33 4.2.1 Main Comments From Non-Railway Stakeholders .............................................................33 4.2.2 Main Comments From CN and CP ......................................................................................35 4.2.3 Update on Recent CN and CP Initiatives ...........................................................................35 4.3 CONCLUSION ............................................................................................................... 36 5. CONSIDERATIONS .................................................................................. 37 5.1 IMPORTANCE OF EFFECTIVE SUPPLY CHAINS AND BALANCING STAKEHOLDER INTERESTS ......................................................................................... 37 5.2 COMPLEXITY OF THE RAIL-BASED LOGISTICS SYSTEM ....................................... 38 5.3 COMPETITION AND RAILWAY MARKET POWER .................................................... 38 5.4 RECENT RAILWAY INITIATIVES ................................................................................. 42 5.5 SUSTAINABILITY .......................................................................................................... 42 5.6 IMPROVED PROCESSES TO DRIVE RESULTS ............................................................ 42 5.7 OTHER CONSIDERATIONS .......................................................................................... 43 5.8 CONCLUSION: THE NEED FOR CHANGE ................................................................. 45 iii 6. KEY RECOMMENDATIONS ..................................................................... 47 6.1 INTRODUCTION ........................................................................................................... 47 6.2 GENERAL APPROACH .................................................................................................. 48 6.3 THE RAILWAY COMMITMENT LETTERS ................................................................... 49 6.4 COMMERCIAL APPROACH .......................................................................................... 49 6.4.1 Notification of Service Changes ...........................................................................................50 6.4.2 Implementation of Service Agreements ...............................................................................50 6.4.3 Establishment of a Dispute Resolution Process ....................................................................51 6.4.4 Enhanced Performance Reporting ........................................................................................52 6.4.5 Sustainability .......................................................................................................................55 6.5 RECOMMENDED REGULATORY FALLBACK PROVISIONS ..................................... 56 6.5.1 Notification of Service Changes ...........................................................................................56 6.5.2 Implementation of Service Agreements ...............................................................................56 6.5.3 Regulated Dispute Resolution Process ..................................................................................57 6.5.4 Enhanced Performance Reporting .......................................................................................58 6.6 IMPLEMENTATION OF LEGISLATION ....................................................................... 59 6.7 IMPLEMENTATION OF THE PANEL’S RECOMMENDATIONS ................................. 61 7. OTHER ISSUES IDENTIFIED BY NON-RAILWAY STAKEHOLDERS ... 63 7.1 OTHER ISSUES WITHIN THE PANEL’S MANDATE .................................................. 63 7.2 OTHER ISSUES BEYOND THE PANEL’S MANDATE .................................................. 65 iv APPENDIx A – RAIL FREIGHT SERVICE REVIEW PANEL MEMBERS’ BIOGRAPHIES ........................................ 69 APPENDIx B – TERMS OF REFERENCE FOR A REVIEW OF RAIL FREIGHT SERVICE ........................................................ 71 APPENDIx C – RAIL FREIGHT SERVICE REVIEW PANEL TERMS OF REFERENCE .......................................................... 79 APPENDIx D – NOVEMBER 9, 2009 CALL LETTER FOR SUBMISSIONS ....................................... 81 APPENDIx E – LIST OF STAKEHOLDERS WHO PROVIDED SUBMISSIONS ..................................................... 85 APPENDIx F – LIST OF STAKEHOLDERS CONSULTED .............................. 89 APPENDIx G – OCTOBER 8, 2010 CALL LETTER FOR SUBMISSIONS ON THE INTERIM REPORT ................................................... 91 APPENDIx H – INTERIM REPORT RECOMMENDATIONS COMMERCIAL APPROACH ................................................... 93 APPENDIx I – LEVEL OF SERVICES ............................................................... 95 APPENDIx J – FINAL OFFER ARBITRATION ............................................... 99 APPENDIx K – ANCILLARY CHARGES ........................................................ 107 APPENDIx L – PHASE I RESEARCH COMMISSIONED BY TRANSPORT CANADA ........................................................ 109 v APPENDIx M – CN’S COMMITMENT LETTERS ............................................ 111 APPENDIx N – CP’S COMMITMENT LETTERS ............................................. 121 APPENDIx O – JUNE 9, 2010 QGI LETTER TO PANEL ............................... 127 APPENDIx P – PROPOSED FRAMEWORK FOR
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