A court case involving two local rail line groups and the Canadian Transportation Agency could set a precedent for other groups hoping to set up short lines.
Two groups based in southern Saskatchewan are taking the CTA to Federal Court in a dispute over the agency’s determination of the net salvage value of the rail lines the groups want to buy from Canadian Pacific Railway.
While no court date has been announced, some of those involved say it could be this fall in Winnipeg.
“This will be a precedent setting case,” said Glenn Pederson, part of a group hoping to operate a short line running from Estevan to Tribune.
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“If we’re successful, this could really help other rail lines to be sold.”
Local municipalities are carrying out the court challenges on behalf of farmers who want to set up short lines to ship producer cars.
The case being pursued by the Rural Municipality of Rose Valley involves 66 kilometres of track from Estevan to Tribune.
The case pursued by the Town of Bengough involves 112 km of track from Bengough to Weyburn.
Both lines hook up with a CPR main line between Moose Jaw and the U.S. border.
The groups were unable to agree on a purchase price with CPR, and in the fall of 2007 they asked the CTA to determine the net salvage value of the track, which would then form the basis of the sale price.
The agency determined the value to be $2.93 million for the Bengough line and $2.26 million for Rose Valley line, and neither group was happy with the outcome.
“We have a number in mind as to the bare minimum NSV we would need, and we’re a long way apart,” said Maurice Koszman, a farmer and spokesperson for Wey-West Rail, a group of local farmers that wants to operate a short line on the Bengough line.
He declined to be more specific, citing a confidentiality agreement with CPR.
Net salvage value is the market value of an asset minus the costs associated with its disposal.
According to the CTA’s website, the process for determining salvage value traditionally includes the salvage value of track materials, the cost of environmental restoration, the value of the land and the commercial impact of leases or agreements related to the line.
The net value is then calculated by subtracting the estimated costs of removing and salvaging the track and other materials.
In the court case, the groups will argue that the CTA failed to take two significant factors into account in its determination of salvage value.
- A railway is required to pay the local government $10,000 a mile for three years. The groups say that should be deducted from the salvage value; the CTA says it’s a separate issue.
- Local bylaws require the payment of compensation for reclamation of the land on the rail right-of-way. Again, the groups say that should be deducted, while the CTA says no.
“We don’t understand why the CTA disagrees with us,” Koszman said. “We feel we have a strong legal case.”
A CTA official declined to comment because the case is before the courts.
Koszman said if Bengough can obtain the line, Wey-West, which is made up of nine area farmers, would expect to ship about 400 producer cars off the line in the first year of operations and increase that to 700 to 800, depending on the availability of grain and rail cars.
He said the line was upgraded in the 1990s and is in good condition. There are farmer-owned elevators on the line at Bengough, Radville and Ceylon.
Pederson said while he didn’t have specific numbers in mind, there would be significant demand from producers on the Estevan to Tribune line.
The last train run was in 2002, when 30 producer cars were loaded. There are no loading facilities on the line, but the group hopes to buy a Pioneer elevator at Tribune that the company has closed.
The groups also hope the provincial government will provide financial and technical assistance in the start-up period.
