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4/5/2005



Rail News: Rail Industry Trends

Canadian Pacific, Elk Valley Coal reach five-year pact


Today, Canadian Pacific Railway announced that it reached a five-year agreement with Elk Valley Coal Corp. to transport metallurgical coal from the shipper’s mines in southeast British Columbia to Vancouver -area ports for export.

The five-year deal covering Elk Valley Coal's five mines in southeast British Columbia retroactive to April 1, 2004, and extends to March 31, 2009. Elk Valley Coal also has committed to increase the base coal volumes to be moved in line with planned capacity increases. The contract also includes:

* A framework for the movement of additional tons above the base volume during the 2006-2008 coal years, with a rate premium on the additional tons;

* Fixed coal year rates for the pact’s first three years, with the 2004 rate being about 20 percent higher than the 2003 rate, and the 2005 and 2006 rates being about 60 percent higher than the 2003 rate;

* Rates for the 2007 and 2008 coal years that will be linked to Elk Valley Coal's price for coal, with a floor and ceiling rate -- both of which will be higher than the 2004 rate; and

* A fuel cost adjustment mechanism for the contract’s last two years.

CPR and Elk Valley Coal also agreed to discontinue all legal and regulatory proceedings relating to a contract dispute over the transport of coal from five southeast British Columbia mines.

“This contract provides clarity and stability in our operational and financial relationship,” said CPE President and Chief Executive Officer Rob Ritchie in a prepared statement. “Both parties can now work together to take full advantage of the increasing global demand for metallurgical coal.”




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