government hopper cars and the canadian grain …...use of cars can be used to carry grain in north...
TRANSCRIPT
Publicly-Supplied Hopper Cars and the Canadian Grain Handling and
Transportation System
Steve Pratte, MCIP, CCLP
Canadian Canola Growers Association
Fields on Wheels – October 21, 2016
1
Presentation Outline
• Introduction
• Government Acquisition
• Government Movement Towards Divestiture
• Illustration of Transition (underlying data set)
• Current Composition
• Strategic Considerations
2
Introduction
• Western Canada’s Grain Handling and Transportation System (GHTS) is a complex and multi-actor supply chain.
• Transports the output of western farmers to domestic and international markets – five year average production of 60,075,000 tonnes.
• Underpinned by fleet of approximately 22,000 hopper cars, gathering and transporting grain over 17,000 route miles from 370 primary and processing elevators.
• Hopper car fleet is amalgam of ownerships, and a mix of equipment age, physical size and carrying capacity.
3
Government Acquisition
• Influencing policy / economic context in 1960-70s.• Need to transition from boxcar to new technology
• Federal government first purchase of 2,000 in 1972.
• Over next 20 years, federal fleet grew to approx. 13,500.
• Supplemented by further 6,000 publicly-supplied:
• CWB: 4,000
• Alberta: 1,000
• Saskatchewan: 1,000
• Government and publicly-supplied cars apportioned between CN and CP.
4
• Public policy gradually shifted towards deregulation.
• Hopper cars stood on periphery of broader reforms.
• March 1996 Budget signalled intention to divest and sparked debate as to ownership.
• October 12, 2007 – announcement of Operating Agreements with CN and CP.
• Advances in hopper car design since 1970’s:
• Construction: design and material
• Capacity: 4,550 ft3 5,150 ft3
• Max. Gross Weight: 263,000 lbs. 286,000 lbs.
Government Movement Towards Divestiture
5
Major Elements of Government Hopper Car Operating Agreements with CN and CP Duration Ten years with one year notice of termination in eighth year, for no more than 3,000 cars.
If not terminated, agreement remains evergreen.
Use of Cars Can be used to carry grain in North America.
Can be used for other commodities if precautions are taken to protect physical integrity.
Payment for Use Cars are provided to railways at no cost for regulated grain movements.
Alternate-use payments for non-regulated movements.
Maintenance Railways are responsible to maintain cars to federal government safety standards and industry operating
standards.
Government will conduct inspections every second year to ensure cars meet these standards.
Railways are responsible for maintenance costs.
Refurbishment All steel cars built after 1974 will be inspected during the first 5 years of the agreement to identify
refurbishment requirements.
Cars will be refurbished to industry standards at railways’ expense.
Refurbishment includes replacing defective gates that results in grain leakage and installing safety reflectors on
every car.
The government will conduct post-refurbishment inspections to ensure needed work has been completed.
Replacement Railways are responsible for replacing cars that are retired or destroyed, obligations under the CTA.
Operating Reports Monthly reporting on car use.
Monthly reporting on destroyed cars and repairs.
Public Annual
Reports
Summarize information in monthly operating reports.
Report on change in railways’ grain fleets – retirements, destroyed cars and additions.
Summarize results of refurbishment and maintenance inspections.
Summarize information on revenues received from the railways.
Transport Canada (October 12, 2007). News Release: Canada’s New Government Concludes New Agreements with Railways Operating the Federal Grain Hopper Car Fleet.6
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
Nu
mb
er o
f H
op
per
Ca
rs
Federal Government – Estimated Hopper Car Acquisition
Source: Quorum Corporation
Government Acquisition
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Source: Quorum Corporation
Government Acquisition
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0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994
Nu
mb
er o
f H
op
per
Ca
rs
Federal Government – Estimated Hopper Car Acquisition
Estimated Retirement of Railway Boxcar
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
Nu
mb
er o
f B
ox
cars
Estimate of Railway Boxcar Fleet used for Grain Transport
Source: Quorum Corporation 9
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
22,000
24,000
26,000
28,000
30,000
32,000
34,000
Nu
mb
er o
f C
ars
Railway Boxcars
Publicly-Supplied Hopper Cars
All Equipment
Estimated Transition: Boxcar to Hopper Car
Source: Quorum Corporation 10
Estimated Transition: Standing Capacity
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0
500
1,000
1,500
2,000
2,500
Sta
nd
ing
Ca
rry
ing
Ca
pa
city
(0
00
To
nn
es)
Boxcars
Publicly-Supplied Hopper Cars
All Equipment
Source: Quorum Corporation
Estimated Transition: Implications on Capacity
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
An
nu
al
Ca
rry
ing
Ca
pa
city
(0
00
To
nn
es)
Boxcars
Publicly-Supplied Hopper Cars
All Equipment
Canadian Grain Exports (000 Tonnes)
Source: Quorum Corporation 12
Current Composition
• End of 2015:
• Approx. 22,400 hopper cars in circulation (variable by month: on-line fleet, storage and bad order)
• Estimated:
• 8,400 federal
• 3,100 publicly-supplied
• Inference: 10,900 both railway and shipper supplied
• Shift: from government-supplied to railway / shipper supplied.
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Strategic Considerations: Estimated Attrition
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,00019
70
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84
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86
19
88
19
90
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92
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96
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98
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00
20
02
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20
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10
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20
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28
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Ho
pp
er C
ars
All Publicly-Supplied Equipment Government of Canada
Estimate of Government and Publicly-Supplied Hopper Cars in Service
Source: Quorum Corporation 14
Alberta: ~900 cars
Government:
~3,600 cars
• Longer-term relationship between increasing production trend and carrying capacity.
• Impact of advancement in cars and turnaround times: increased productivity
• Capacity of cars has increased
• GHTS avg. car cycle has declined: 1990-2000: 19.9 days 2014-15: 13.8 days
• Inference: approximately 75% of the rolling stock required to move a given amount of grain 15 years ago is required today.
• Role of Maximum Revenue Entitlement.
• Retirement of publicly-supplied fleet and plan for future replacement.
Strategic Considerations
15