Government Rewards Railways

Shades of Brian Mulroney.

In the last few weeks of his government’s 10-year reign, before the Liberals under Jean Chrétien officially took power, Mulroney signed an agreement with the railways that gave them renewed control over the hopper cars the federal government had purchased for the movement of prairie grain.

As part of that operating agreement, Mulroney threw this bone to the railways: if the government were to decide to sell the hopper cars, the railways would have a right of first refusal over the cars. This agreement could only be terminated with five year’s notice to the railways.

There was certainly no reason to do this. The government didn’t owe the railways anything.

But it was a smart move on the railways’ part to have this included.

When the Liberal government announced in 1996 that it planned to sell the cars, as part of divesting itself of nearly everything, the right of first refusal became a major issue.

The coalition of farm groups that banded together as the Farmer Rail Car Coalition knew the right of first refusal existed. Its inclusion in the agreement meant the cars would end up in the railways’ hands if the government continued with the sale before the terms of the operating agreement expired.

It took a decade, but the Liberals decided to sell the cars to the FRCC.

Unfortunately, foot dragging by Transport Canada allowed the sale to go unfinished before Paul Martin’s minority government fell.

The Harper Conservatives speedily did the railways’ bidding and backed away from the agreement that farmers would own the cars.

Last week, federal agriculture minister Gerry Ritz announced that the government had signed new operating agreements with CN and CP, returning the cars to their care and control for another 10 years.

The government put a brave face on this move, acclaiming it somehow as a victory for farmers.

Far from being any kind of victory for farmers, the Conservative handling of the hopper car file represents a massive failure that will cost farmers dearly in the future.

As readers will likely remember, it was the FRCC that finally convinced the government that it should act on something it already knew – that the railways were overcharging farmers for maintenance on the cars.

The FRCC also pointed out that by seeking competitive bids for the work, it could have the maintenance done much more cheaply than the railways could do it.

Another tenet of the FRCC plan was to use money earned when the cars weren’t carrying grain to upgrade the fleet and replace cars as old ones were retired.

How does the government plan stack up against the FRCC, which it demolished?

The Conservatives have returned maintenance to the railways’ pleasure. There will be no competitive bids and farmers will pay the cost.

Even more significant, the railways will replace cars that are retired due to age.

However, they will then charge farmers through their freight rates to pay for these cars. The revenue cap will be adjusted to allow for this replacement.

It is estimated this will cost farmers at least $4.50 per tonne for every tonne of grain shipped. Under the FRCC, farmers would have owned the cars they paid for.

Another major flaw in the government treatment of the hopper cars is that it did not act to upgrade the existing cars. For a very small cost, the government could have made improvements to the cars that would have extended their life span and increased their carrying capacity.

The Conservatives were urged to do this by the FRCC and other farm groups, but the window to do so has now closed.

As a result, the cars will be less efficient than they might have been and go out of service more quickly. Farmers will then start paying extra freight charges sooner than they would have had to.

The FRCC had a simple concept. Cost should be kept down. High maintenance standards should be maintained. Farmers who pay for the cars should own them.

The Conservatives also have a simple concept. The railways should get to keep on doing what they have always done – overcharge and under serve farmers.

To ensure this doesn’t change, the new agreement cannot be terminated for at least nine years, and then only for 3,000 of the nearly 12,000 cars.

Like Mulroney before, Canada’s new government wants to be sure the railways are not hindered in their right to take farmers for a ride.

by Paul Beingessner