Last December, the Western Grains Research Foundation got some unexpected good news.
It would be getting $2.7 million from the two national railways, representing excess grain freight rates charged to farmers during the 2005-06 crop year.
Last week the foundation got some unexpected bad news.
It would have to repay $870,783 of that to Canadian Pacific Railway.
“We didn’t expect to get the money in the first place, but we had no expectation we would have to pay it back,” said executive director Lanette Kuchenski.
Read Also
Going beyond “Resistant” on crop seed labels
Variety resistance is getting more specific on crop disease pathogens, but that information must be conveyed in a way that actually helps producers make rotation decisions.
The foundation invested the money received from the two railways and was using the interest to fund research projects.
“It will take some time to figure out how to liquidate some of our long-term investments such that we don’t take a large penalty for doing so,” she said.
“More importantly this could impact some of the research we will be able to fund going into the future.”
In December 2006, the Canadian Transportation Agency announced that both railways had exceeded their allowable grain revenues under the revenue cap for 2005-06.
CPR was found to be $1.5 million over its cap and ordered to pay that amount to the foundation, as required by the Canada Transportation Act.
Canadian National Railway was $2.7 million above the cap and ordered to pay that amount to the research funder.
Each railway disagreed with different aspects of the agency’s calculations and appealed its decision to the Federal Court of Canada.
In June, the court in ruled in favour of CPR and ordered the agency to redo its calculations. The agency announced last week that as a result, CPR’s amount above the revenue cap has been reduced from $1,495,535 to $666,218, and that the foundation was asked to repay $870,783 to CPR.
CN’s appeal is still before the courts and deals with different issues than CPR’s appeal. There is no indication when a decision will be issued.
Kuchenski said CN had immediately informed the foundation that it planned to appeal the amount, and so the foundation set aside $500,000 of the CN payment into a trust account, in case the appeal was successful.
She said the foundation knew CPR might appeal, but received no suggestion from the company that so much money was at stake and so put the entire amount into long-term investments. The interest was expected to produce $47,000 a year for research programs.
She said the foundation is considering asking the railway to make a tax-deductible charitable donation to the foundation equal to the $47,000 a year in interest earnings that was to go to fund research.
CPR spokesperson Breanne Feigel said last week the company was still studying the new decision and plans to meet with the foundation as soon as possible to figure out the best way to handle the situation.
Brian Bell of the transport agency said given that the revenue cap has only been in place since 2000, it’s not surprising that the agency and the railways have to agree on exactly what revenues and costs are to be included in the annual calculation.
“We always hope our decisions are final but we are finding that the railways have been challenging some of the definitions we use and have been successful,” he said. “That’s what happened here.”
The issue in CPR’s appeal was how much money the railway could deduct from its revenue for spending from its Industrial Development Fund, used to build infrastructure like sidings to meet customer needs.
CN’s appeal is based on two issues – demurrage charges and payments, and pick-up and delivery charges paid to truckers for intermodal traffic.
Kuchenski said she hopes the agency and railways can sort out all the rules of the revenue cap to avoid any repeat of this situation.
