Costing review needed for decision on rail cars

The fleets of government-owned grain rail hopper cars will begin to be retired in just six years, and given the lead time needed to build replacements, the official discussion about how and who will pay for the new cars needs to begin.

But to make informed decisions, the federal government must first do a costing review of the railways.

That review would provide indispensible base line data to help make decisions on a host of grain transportation issues, including the recommendations of the Emerson review of Canada’s transportation system.

The most controversial recommendation from the Emerson review was to reform and eventually eliminate the maximum revenue entitlement, better known as the railway revenue cap, to put grain movement on a more commercial footing and create incentive for railways to invest in innovation and new equipment such as rail cars.

The railways say the cap inhibits their ability to invest in infrastructure, specifically mentioning replacement of the government owned hopper car fleets.

Farmers counter that there is strong evidence that railways are handsomely compensated for moving grain. They also note that the rate cap is adjusted annually to account for inflation and the volume of grain moved.

Outsiders might wonder how it happened that grain transportation is regulated and how governments came to own grain hopper cars.

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With regional near monopolies — Canadian Pacific Railway in the south and Canadian National Railway in the north — farmers and others in the early years of prairie settlement demanded that government regulation fill in for normal competition to bring fairness to the cost of rail transportation.

The Crow’s Nest Pass Freight Rate of 1897 controlled the amount railways could charge for moving grain, but by the 1970s it was outdated and railway claims that they could not afford to replace the obsolete fleet of box cars gained a sympathetic ear.

The federal government, as well as the governments of Saskatchewan and Alberta and the Canadian Wheat Board, all bought hopper cars.

Today, of 22,400 grain hoppers in service, about half are owned by government: 8,400 by Ottawa and about 3,100 by Saskatchewan, Alberta and the then-CWB. The latter group will reach the end of their economic lives of about 40 years by 2022.

The federal cars will start to age out a few years after that. The estimated total replacement cost is close to $1.5 billion.

Replacing these old cars will be a challenge but also a great opportunity for increased efficiency.

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The old hoppers are longer but carry 13 percent less grain than the latest designs.

CP estimates that using modern rail cars could raise the capacity of unit trains by 23 percent, adding 3.8 million tonnes of additional capacity.

The topic of rail car replacement is starting to get space on farm group meeting agendas. Few believe governments will foot the bill. Options include railways or shippers buying cars for pooled or private fleets.

A private-public partnership is another option with a private company providing the cars in return for a long-term lease paid by some mix of government, shippers and railways.

But decisions can’t be made in a vacuum. They need data from a costing review, and the Liberals promised one during the election. They should get on with it.

Bruce Dyck, Barb Glen, Brian MacLeod, D’Arce McMillan and Michael Raine collaborate in the writing of Western Producer editorials.

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