ANOTHER opportunity to inject competition, the fuel of efficiency, into
Canada’s rail industry by way of running rights has been denied.
The Canadian Transportation Agency has rejected Ferroequus Railway’s
bid to haul Canadian Wheat Board grain over Canadian National Railway’s
mainline from Camrose Alta., to Prince Rupert, B.C.
The CTA says its ruling against Ferroequus does not prevent other
companies from applying for the right to run trains on rails owned by
the mainline railways, Canadian National and Canadian Pacific.
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It says if future applications address more obvious cases of poor or
costly service by the railways, the agency would more likely grant
running rights.
However, the Ferroequus decision indicates the CTA is setting the bar
high when it comes to granting this remedy. It says granting statutory
running rights is an exception to be made only when there is evidence
that the mainline railway has failed to provide service or engaged in
anti-competitive conduct.
This clearly weights the process in favour of CN and CP.
It also dashes prairie farmers’ hopes that running rights could become
a handy tool to make the grain transportation system more efficient.
It is understandable that the agency does not want to trample the
railways’ property rights. Requiring a rail owner to allow another
company to operate on its track has an element of expropriation, a
serious matter.
However, there are instances where, in the public interest, governments
interfere with property rights.
We might see more merit in the CTA’s position if Canada’s railway
sector was already a hotbed of competition. But it isn’t. It is a
duopoly with the power shared by CN and CP.
Many shippers are captive to one line and while they may get adequate
service, many believe it would be better if there was more competition.
While the CTA ruled in the Ferroequus case that there was no evidence
that CN was providing unacceptable service, it seems a suspicious
coincidence that once Ferroequus raised the possibility of competition,
CN dropped its rates on the Prince Rupert line.
The railways are not delicate flowers that must be protected by a
favourable environment in CTA decision making.
That environment must be rebalanced to give rail users a fairer footing
in their pursuit of more competition.
One solution is to shift the burden of proof in CTA applications.
Instead of the applicant being required to prove that granting running
rights is in the public interest, the rail line owner would have to
prove that it is against the public interest.
This would give a better balance to the CTA’s deliberation, maintain
reasonable respect for property rights, but lower the hurdle enough to
make running rights a realistic option.
