Rail Competition

Commentary, Transportation, Les Routledge

The issue of rail competition is getting some attention by shippers.  I notice that the Keystone Ag Producers are encouraging members to express their views.

A while back, Laura Rance had an article on the subject in the Winnipeg Free Press where she made a couple of good points.

We’ve all heard tales of the inefficiencies that have plagued centrally planned economies in far-off places. The compounding effects — sluggish supply chains, lower productivity, missed delivery targets and people who could be working standing around with nothing to do — eventually drag the economy so deeply into an abyss it takes a revolution to get things rolling again.  It turns out, it doesn’t matter whether it’s a tinpot dictatorship or railway executives running the show; if there isn’t enough competition in the system, or regulation that compensates for that lack of competition, efficiency falls off the tracks.

A federal review panel has acknowledged lack of competition is a problem in Canada’s railway business, but so far, the government isn’t showing much interest in fixing it.

One example of Laura’s point on the need for more competition is the operation of the Boundary Trail short line rail operation http://agcanada.ironsolutions.com/Article.aspx?ID=17251.  In 24 months, they are on path to exceeding the total traffic over the last 10 years when CP managed the line.  I have seen other examples of the same failure of central planning in the operation of rail lines.  They do not appear  to have the ability to make money from a mixed traffic, milk run type of business.

For the most part, the two main rail line company do at one thing well, namely moving 100 or more cars from one location to the next as a unit train.  Both are also getting pretty good at the loading and unloading of containers onto unit trains at either end of the trip.  Their centrally managed logistics system works well with this type of traffic.

The problem with mainlines is that their central planning model does not appear to be appropriate for dealing with variable and limited volume traffic on branch lines.  While the example on the Boundary Line is producer grain cars, I am aware of another one that is a mix of producer cars, alfalfa pellets and wood products.  In both cases, localized management and operation of the line has resulted in improved traffic levels.

Australia has had to deal with another form of this type of challenge for rail lines serving mines. http://www.theaustralian.com.au/business/opinion/prescott-dismisses-separation-comparison-to-telstra/story-e6frg9if-1225859054442 In the case of the Hunter Valley system, they opted for structural separation of the rail infrastructure and train operations.  Structural separation was also a big issue in the privatization of Queensland Rail http://www.theaustralian.com.au/business/greiners-group-set-to-deliver-qr-offer/story-e6frg8zx-1225865268488 .

It appears to my simple mind that more competition would be a good thing.  If Australia can make competition work on freight lines and European countries can figure out how to make competition work on high speed passenger rail service http://www.economist.com/node/16889039 , surely we can figure out how to make it work for freight.  Perhaps examining the solution of structural separation of rail infrastructure operations and train operations is a subject that merits some examination in North America.