Canada is the world’s second-largest country by area and relies heavily on trains to transport grain, beans, automobiles, potash, coal and other goods.

“It’s a catastrophe. Literally nothing would move,” said Greg Northey, vice president of public affairs at Pulse Canada.

Talks between Canadian National Railway and Canadian Pacific Kansas City on one hand and the Teamsters union on the other have deadlocked, with each side accusing the other of bad faith.

The rail companies say they will start locking out workers on Aug. 22 if they cannot reach a labor deal, while the union says it is ready to call a strike for that date.

Industry groups want the Liberal government of Prime Minister Justin Trudeau to prevent a stoppage, noting Canada’s railways transport around $380 billion worth of goods annually.

“Factoring in the millions of Canadian jobs that would be impacted, the magnitude of the disruption is daunting,” the Business Council of Canada lobby organization said in an open letter to Trudeau and Labour Minister Steven MacKinnon.

U.S. freight traffic impacted

A stoppage would also hit the United States, given the degree of integration between the two economies. Canada sends around 75 per cent of all goods exports south of the border.

The networks of the two Canadian rail operators, CN and CPKC, connect with several key U.S. rail and shipping hubs such as Chicago, New Orleans, Minneapolis and Memphis. CPKC’s network also extends further south connecting with ports on both the east and west coast of Mexico.

CN said on Tuesday it was putting in place an embargo on any new reservations for movement of hazardous materials, security-sensitive cargoes or refrigerated containers originating in Canada, starting on Thursday.

It also announced it was embargoing all intermodal traffic originating from over half a dozen U.S. hubs with which its network connects, starting on Friday.

Separately, U.S. rail operator Norfolk Southern on Tuesday advised customers that it was embargoing all hazardous and security-sensitive cargoes to or from CN and CPKC’s networks effective immediately. It said additional embargoes may come in case of any work stoppages at the Canadian rail operators.

Some U.S. companies find it more efficient to use Montreal or Vancouver for imports and exports.

U.S. logistics firm C.H. Robinson, which manages more than 650,000 loads across the border a year, said it was lining up extra trucking capacity on both sides of the border.

“When all trains serving the entire country could literally be stopped on their tracks, that’s another whole level of disruption,” said Scott Shannon, a senior executive at C.H. Robinson.

Pressure mounts

Industry groups say MacKinnon has the power to refer the dispute to the country’s labor relations board and thereby head off a stoppage.

MacKinnon has so far said he wants the two sides to strike a deal at the negotiating table.

Pressure on Ottawa looks set to mount in the coming days as industry groups hammer home the potential costs of a stoppage.

Earlier this week, Morgan Stanley in a note to clients said that each week of shipment disruptions could dent the earnings before taxes of mining giant Glencore by an estimated $137.2 million, or more, as a rail shutdown would disrupt coal shipments from its majority-owned unit, Elk Valley Resources.

The Chemistry Industry Association of Canada said chlorine shipments would soon become unavailable, hitting the quality of drinking water within two weeks.

“There are very large municipalities that – if the strike goes on – are going to be under boil water advisories,” CEO Bob Masterson said by phone, noting that the industry moved more than 500 rail cars a day.

“There is no plan B … to transport this kind of volume you will need 2,000 trucks, roughly. There aren’t 2,000 trucks, and there aren’t 2,000 drivers,” he said.

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Earlier this month, rail workers from Canadian National (CN) and CPKC voted overwhelmingly to strike as soon as May 22. The federal government asked the Canadian Industrial Relations Board (CIRB) to look at whether the strike would have safety implications. This delays any strike action until at least 72 hours after the board hands down a decision.

Contracts covering locomotive engineers, conductors and yard workers at CN and CPKC at the end of 2023 and Teamsters Canada Rail Conference (TCRC) is re-negotiating a third agreement covering CPKC rail traffic controllers.

Agriculture groups have said a strike could bring grain movement to a halt, which would mean financial losses for farmers.

In an update to members on May 22, TCRC said it met with the company and federal mediators in Montreal on May 17.

“Despite being ready to negotiate over the long weekend, the Company declined to participate unless their original demands were met,” TCRC said.

The groups parted ways on Tuesday and no more meetings have been scheduled, the union added.

“Ultimately, no progress has been made on the Union’s demands this week. The Company clearly indicated its preference for arbitration over negotiation, suggesting it hopes for government intervention to stop collective bargaining.”

In a news release yesterday, CPKC said it has “done everything it can to restore certainty and predictability for all our employees, their families and our supply chains.” This includes two different offers to the union.

It said TCRC refused an offer to resolve the dispute via binding arbitration.

“CPKC remains firmly committed to negotiating renewed agreements to avoid a work stoppage that would be detrimental to the interests of all stakeholders… Unfortunately, it is clear the TCRC leadership does not share that commitment,” the company said.

On May 16, CN said it had presented a new offer to the union that adds overtime pay for shifts over 10 hours with a maximum of 12 hours per shift for employees in Western Canada, scheduled days off and wage increases of three per cent in 2024 and 2.5 per cent in 2025.

In an update to members, TCRC said the offer “decimates your collective agreements and compromises your safety in favour of operational ease and profits.”

The union has accused the rail companies of trying to remove rest provisions they say are critical to safety. CN said its offer requires employees to comply with duty and rest period rules.

CPKC said offers it has made don’t compromise safety. “To say or suggest otherwise is patently false,” it said in the May 22 news release.

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In a decision handed down yesterday, the Canadian Transportation Agency ruled that the Canadian National Railway Company (CN) exceeded its maximum grain revenue of  entitlements in crop year 2022-23 by nearly $3.5 million. Its limit is $1.08 billion, the CTA said in a news release.

The Canadian Pacific Kansas City Railway Company (CPKC) exceeded it’s revenue limit by almost $3.4 million. Its revenue is capped at $940.5 million.

CN and CPKC have 30 days to pay the overage, plus a five per cent penalty.

By regulation, these payments go to the Western Grains Research Foundation, the news release added.

The railways moved some 60 per cent more grain this year than last year, with over 45.3 million tonnes freighted across the country. Last year, the trains moved 28.4 million tonnes.

The increase can mainly be attributed to recovery after the droughty 2021-22 season, CTA said.

In the last season, both railway firms also exceeded their revenue caps, chipping in $5.7 million to grain research.

Over the 2022-23 season, the bulk of grain moved went to Vancouver, with CN carrying a bit more than 15.1 million tonnes, and CPKC moving just over 15.4 million, according to the CTA’s written decision.

CN brought 4.8 million tonnes to Prince Rupert, just over 1.5 million to eastern Canada, totallying 24.2 million tonnes with an exchange switching adjustment.

CPKC brought 4.6 million tonnes to Thunder Bay, and nearly 861,000 tonnes to Eastern Canada with a total of 21.1 million tonnes moved, including the exchange switching adjustment.

—Geralyn Wichers is associate digital editor of AGCanada.com. She writes from southeastern Manitoba.

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The CTA’s report stated that CN’s revenue from transporting Western Canadian grain was nearly C$1.045 billion and was C$2.4 million over its entitlement. The railway must now pay a five per cent penalty of nearly C$120,000 to Western Grains Research Foundation.

Conversely CP’s grain revenue amounted was in excess of C$1.014 billion, and C$20.25 million under its cap.

The CTA noted 2020/21 saw record grain movement of more than 52.33 million tonnes, up nine per cent from the previous year. The agency issued its ruling on Dec. 22.

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