ong after the fall of the grain elevators,
the rail lines that served them continue to criss-cross
the Prairies, connecting rural communities and their
businesses to main-line railways. While Canada’s two Class 1
freight carriers, CN and CP, abandon lines to focus on moving
high volumes through core transportation corridors, farmers are
among those leading the charge to buy old branch lines and
build a network of short-line rail companies to keep Prairie grain
and other commodities moving.
A “short-line” refers to an independent rail company that
operates over a relatively short distance. They are important
players in moving freight from remote areas and rural
communities to interchanges where they can be picked up
by the main-line railways and moved to market. Across the
Prairie provinces, there are now 20 short-line railways covering
more than 3,900 kilometres of track and moving thousands of
producer grain cars and other goods each year.
In an industry fixated on moving high volumes at high
speeds to international markets, short-line rail companies offer
personalized service, higher returns to producers and less time
on the road. They are hyper-local businesses in an increasingly
global world.
“Our size is our advantage,” said Perry Pellerin, CEO of Great
Sandhills, SK Railway (GSR), which runs 198 kilometres of track
from Sandhills to Swift Current, SK. “If you’re a producer who
wants to load a car, you can call and talk to a short-line—it’s
communication that you would never get from a Class 1. We
are easier to deal with, and we provide better information and
service to our customers.”
Modern short-line railways emerged from changes to the
1996
Canada Transportation Act
that
allowed the two national freight carriers to
stop operations in parts of their network
by selling or leasing less-profitable,
low-volume lines. Facing the spectre of
losing not just the service but also the
infrastructure that connected them to
other markets, some communities rallied
to buy the branch lines and operate them
on their own. Between 1996 and 2009,
the number of short-lines in Canada
boomed from 12 to 50.
“What emerged was almost a
transitional plan where the lines were
transferred to a group of people who
believed they could make them viable, but it was contingent
on the idea that the grain elevator companies could change
the economics and make small crib elevators viable as well,”
explained Marcel Beaulieu, rail industry analyst with Quorum
Corporation, the group mandated by the federal government
to monitor the Prairie grain handling and transportation system.
“Unfortunately, the grain companies had an agenda to get rid of
the smaller elevators. As the elevators closed, a lot of folks tried
to replace elevator loss with producer car sites.”
With their fortunes tied to decisions in a system beyond
their control, today’s short-line operators are nimble and
diversified—traits shared by anyone who has succeeded in the
grain sector.
“The ones that have survived have community coming
together to try to save the short-line as a first step,” said
Beaulieu. “On top of that, they have also developed producer
car-loading capacity, recasting themselves as integrated
commercial concerns that have rail car loading and grain
gathering on their line.”
Alberta’s only short-line, Battle River Railway, is an example
of the kind of community-based collaboration and “get it
done” work ethic that characterizes much of the short-line
industry. The former CN branch line runs 90 kilometres from
Alliance to Camrose, and the operators have consistently
increased their volumes and diversified their business since
buying the line in 2010.
“We initially bought the line to maintain a piece of
transportation infrastructure, and then realized it had the ability
to generate business and keep money in our communities,”
said Battle River Railway chairman Ken Eshpeter, who farms near
Forestburg. “When we move 3,000 cars, we keep $2 million in
our community that otherwise would have left.”
When CN announced plans to shut down the line in 2008,
Eshpeter led the effort to secure interest and investors to buy
the line. They formed a new generation co-operative in 2009,
and started negotiating with CN. New generation cooperatives
are increasingly common producer-led value-added enterprises
that have a closed membership, and use a system of delivery
rights and obligations to encourage
business loyalty and provide a form of
vertical integration.
“We talked to every farmer in our
catchment area in their kitchens over
coffee, and sold 153 A-shares, 463
B-shares and 122 C-shares. In total, we
raised $3.5 million through share sales,
then put that together with financing to
buy the line,” he said.
Now entering its fifth year, Battle River
Railway is a bare-bones operation focused
on delivering personalized service to
the farmers and other shippers on the
line—something that depends entirely on
car allocations from CN and the tariffs that CN sets for hauling
goods from its interchange.
“Running the rail line is straightforward—talk to farmers,
quote prices, organize the grain and get it loaded. It’s
negotiating with CN to get the cars, get themmoving and get
them back that’s a challenge,” said Eshpeter, adding that Battle
River Railway moved 2,100 cars last year. “If we could get CN to
respond positively to our need for cars, within a year and a half
Spring
2015
grainswest.com
37
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“Unfortunately, the grain
companies had an agenda
to get rid of the smaller
elevators. As the elevators
closed, a lot of folks tried
to replace elevator loss
with producer car sites.”
–Marcel Beaulieu
