The two national railways have come out of the closet regarding the federal government’s plan to sell its fleet of grain hopper cars.
One wants to buy them, the other doesn’t.
Canadian National Railway has confirmed that it has offered to buy roughly half of the 12,400 cars that are up for sale.
Ottawa has not responded to the proposal, which was made in January and is still on the table, said CNR spokesperson Jim Feeny.
“We’re prepared to invest in order to ensure our ability to meet the needs of grain shippers,” he said.
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He said the railway will pay fair market value for the cars, but declined to be more specific to protect the company’s bargaining position should the cars be sold through a public bidding process.
The entire fleet is estimated to have a market value of $100-$200 million.
Canadian Pacific Railway said it is not interested in buying any cars. It proposed to Transport Canada in late September that Ottawa keep the cars and sign a new operating agreement to lease them to the railways for up to two years.
Spokesperson Leah Olson said the railway is concerned about the uncertainty surrounding the future of the cars and wants to be sure it has access to a steady and reliable supply.
“What CPR is looking for is a commitment that can be made over a period of at least 18-24 months so that we can plan our hopper car fleet accordingly,” she said.
The main reason the railway is not interested in buying is the age of the government cars, which were brought into service throughout the 1970s and early 1980s.
“If you’re going to put a lot of money into cars and the choice is between cars that are 30 years old and new higher capacity cars, the new cars would be our preference,” Olson said.
The federal government announced in 1996 that it wanted to sell its fleet of rail cars.
Until now, only the Farmer Rail Car Coalition has publicly announced its desire to buy them. The coalition consists of a group of farm organizations that would operate as a non-profit corporation and lease the cars to rail companies.
It said the government should transfer the cars to the coalition for a nominal fee, on the grounds that the federal government originally bought the cars for the benefit of western Canadian farmers. By operating as a non-profit corporation and contracting out maintenance, it said, it can reduce rail shipping costs.
Officials with both railways said their proposals are not aimed at blocking the coalition’s bid, but they have concerns about possible coalition ownership.
Olson noted that the coalition refers to itself as a “leasing company with a difference” and that raises some red flags.
She cited questions about the impact of coalition ownership in areas like car allocation and freight rates.
“If they are a leasing firm like any other leasing firm that the railway deals with, we are quite happy to do business with them,” she said. “But if those differences involve issues beyond the jurisdiction of a typical leasing firm, then we’re not interested.”
Coalition president Sinclair Harrison has said publicly that the group has no interest in getting involved in rail car allocation and that freight rates would go down if maintenance costs can be reduced.
Feeny said CNR has met with coalition officials, and a number of unanswered questions remain.
“They have not disclosed to us their operating plans or shown how these cars are used to meet the interests of western Canadian shipping, so we’re not in a position to offer a value judgment on whether their plan would work or not,” he said.
