The Canadian Transportation Agency is undertaking a review that could lower 2007-08 grain feight rates by as much as $2 a tonne.
When the federal Conservative government ditched plans to transfer federally owned hopper cars to the Farmer Rail Car Coalition in May 2005, it promised to reduce the amount paid to the railways under the revenue cap to cover car maintenance costs, thus reducing freight rates by $1.50 to $2 a tonne.
At the time, senior government officials said that could happen as soon as Aug. 1, 2005.
It didn’t, and it still hasn’t, much to the chagrin of FRCC president Sinclair Harrison, who last week expressed frustration over the unfulfilled promise.
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“I think they’re being overly cautious,” he said of the government.
“And I imagine the railways are lobbying them not to pay it out any sooner than they have to and hoping maybe we’ll forget about it.”
Legislation giving the CTA authority to implement a one-time adjustment in the revenue cap to reflect actual maintenance costs is now before Parliament.
Bill C-11 received second reading in the House of Commons in September, but still must receive third reading and Senate approval.
The government has set no timetable for dealing with the bill.
The bill authorizes the CTA to implement the one-time reduction at any time it considers appropriate, meaning it wouldn’t have to coincide with the beginning of the crop year Aug. 1.
Jim Riegle of the CTA’s rail costing division said the agency is gathering the necessary information from railways so it can move quickly on the maintenance costs issue once Bill C-11 becomes law.
“The railways have submitted and are submitting new information,” he said. “We’re examining that, so that once C-11 is passed we are prepared to follow through.”
Maintenance costs were at the heart of the FRCC’s bid to buy the 12,000 federal cars. The coalition’s work revealed that while the railways were receiving about $4,329 per car per year for maintenance under the revenue cap, but they were actually spending about $1,686.
However, those numbers were calculated in 2004, so the agency was directed to update them before any adjustment in the cap.
Whatever adjustment is made will be implemented through a change to the volume-related composite price index used by the agency to measure changes in railway costs as it calculates the revenue cap each year.
Riegle said that work is now getting underway and will be completed by April 30.
“If C-11 passes in the next couple of weeks, we’ll do our best to incorporate that in our work for 2007-08,” he said.
Harrison said it’s important farmers and farm organizations keep pressuring the government to follow through with the promised changes.
He said the cash-strapped FRCC is trying to stay on top of the issue, but it doesn’t have the resources to be the kind of watchdog it once was when it was bidding to buy the rail cars.
“Our feeling is no one else is really keeping on top of this,” he said.
