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CTA review panel's findings might foster more railroad competition in Canada

The Canadian Transportation Act (CTA) Review Panel July 18 released its final report, recognizing that Canada already has significant transportation industry competition, but opening the door for increased railroad competition.
The report — part of a series of recommendations Transport Minister David Collenette plans to use to develop a new transportation blueprint for Canada — states that the government's overarching policy goal "should be to build on the new-found vigor of the rail system, target the problems that persist and resist sweeping measures that hold the potential to create more difficulties than they solve."
"The panel clearly shares Canadian National Railway Co.'s view … that Canada's regulatory regime for railroads works effectively for most shippers, that rail competition is substantial and that the system needs only minor revision, not wholesale change," said Paul Tellier, CN president and chief executive officer, in a prepared statement.
Nevertheless, CN officials are concerned by the panel report's extensive list of recommendations. If adopted in their entirety and "stripped of context provided by the panel," the recommendations ultimately could "constitute a fundamental reversal of policy, a step back to unnecessary re-regulation of the industry," Tellier said. "This is an outcome the panel, in its own wisdom, is not recommending."
For example, CN officials are concerned that the panel is urging the repeal of an existing CTA provision ensuring only shippers suffering substantial commercial harm are entitled to various regulatory remedies. The recommendation could result in CN's customers seeking rates set by regulatory intervention rather than through commercial negotiation.
CN officials also are troubled by the panel's recommendation that, in certain circumstances, running rights provisions be expanded to permit one railroad to solicit traffic on another. The Class I officials believe running rights should apply only in cases under which the host railroad clearly fails to meet its service obligations.
But the recommendation was well received by officials of OmniTRAX Inc., which since September 2000 has been attempting to obtain running rights on CN's and Canadian Pacific Railway's track in Western Canada to provide competition to grain shippers.
"[The recommendation] would allow the presence of a third party to provide competition," says OmniTRAX Chief Operating Officer Gary Rennick.
The Canadian Transportation Agency May 3 ruled it wouldn’t interpret Section 138 of the Canadian Transportation Act in a way that would enable OmniTRAX’s Hudson Bay Railway Co. to obtain running rights to CN's 1,500 track miles in Saskatchewan and Manitoba.
"The difference with that running rights application is that CTA interpreted the existing transportation act as the law," says Rennick, adding that any new legislation likely would enable CTA to more positively consider running rights applications.
Given the different legislative climate, OmniTRAX is considering whether to resubmit its running rights application to CTA, although "we're inclined not to do so," says Rennick.
Instead, the short-line holding company plans to re-evaluate its CanRail initiative to decide whether to use either Hudson Bay or Carlton Trail Railway, or both as operating arms of its grain branch-line competing railroad, or roll the two railways into one.
"We could still work with the Class Is outside of any rulemaking — we don't need regulation change to work out an agreement — but I don't think the Class Is have any plans to do so," says Rennick.
CN believes CTA's recommendations actually close the door on OmniTRAX's proposal: "Running rights are viewed as an extraordinary step," says CN spokesman Mark Hallman.
In the meantime, CN plans to move ahead with Prairie Alliance for the Future (PAFF), a non-profit organization spearheaded by Brotherhood of Maintenance of Way Employes that would create a cooperative of rail workers, unions, farmers and rural communities to operate 1,000 miles of CN grain lines in Manitoba and Saskatchewan.
PAFF would operate a low-cost grain network based on leased rail lines and hired-by-the-mile locomotives, designed to move grain from local communities to CN’s mainline — a way for the Class I to stop operating the lines without causing harm to the communities that rely on the railroad.
CN — along with CPR — also plans to keep a watchful eye on the development of the panel's recommendations, some of which, the Class Is' officials believe, support two national Canadian railroads, but also could give U.S. railroads a competitive advantage in North American freight movements.
"With Canadian industry huddled so close to the U.S. border, policy proposals that would give U.S. carriers an advantage without reciprocal rights for Canadian carriers, present a potential economic risk to Canada," said CPR President and CEO Rob Ritchie.
Although no formal timetable has been established, any amendments to the Canadian Transportation Act or legislation enactment likely won't occur until early 2002.
Jeff Stagl

Contact Progressive Railroading editorial staff.

More News from 7/19/2001