Transport minister Lawrence Cannon says that despite the angry denunciation of critics, the government decision not to sell its fleet of grain hopper cars will save farmers and taxpayers tens of millions of dollars.
On May 4, the Conservative government announced it will cancel an agreement signed between the former Liberal government and the Farmer Rail Car Coalition to transfer the cars on a lease basis for use by the coalition of farm organization and prairie rural municipal governments.
Instead, the government will retain ownership of the 12,000 car fleet and make them available to the national railways. But it will also change the Canada Transportation Act to reduce by as much as $2 per tonne the amount the railways are compensated for car maintenance.
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Cannon said the taxpayer benefit will flow from the fact that the railways pay Ottawa up to $20 million a year for use of the cars outside the grain trade, a payment that he said is as much as the FRCC would have paid each year.
“Obviously a decision had to be made (and) we made a decision,” he said May 4. “I think it’s in the best interests of Canadians. It’s also in the best interests of the people that are involved.”
He said despite some farmer support for the FRCC proposal to obtain a share of the rail car fleet, farmers who ship grain will benefit from the government decision through enforced lower freight rates. Although the government announcement promised a $2 reduction in freight rates, Cannon said the savings will be between $1.50 and $2 per tonne.
“The savings will allow farmers to see more profits in their business.”
The government accepts a Canadian Transportation Agency analysis that the railways have been receiving tens of millions of dollars per year in excess payments from farmers for maintenance costs. The revenue cap formula allows $4,329 per year for freight rate revenue to cover maintenance costs while actual spending has been less than $1,700.
The government has no plan to retrieve any of those excess revenues.
The revenue cap will be reduced to reflect more closely actual maintenance costs once amendments to the transportation legislation are approved by Parliament, Cannon said.
Debate on the legislation will give opposition MPs a chance to attack the Conservative decision to kill the deal with FRCC, even though in the end they likely will support the move to lower freight rates.
“This was an agreement supported by a wide ranging group of organizations across Western Canada,” said Liberal MP, agriculture critic and FRCC supporter Wayne Easter. “We (the Liberals) were too slow in getting the job done but the job was done prior to the last election. It would have benefited the farm community.”
He said the Conservatives “massaged” the announcement by reducing freight rates.
“That’s just an admission that the FRCC was right in that the railways have been gouging farmers for decades but the government of Canada leaves those rail cars in the hands of the very people who have been gouging farmers.”
New Democrat agriculture critic Alex Atamanenko suggested that the government should reimburse farmers for $730 million that he says was overpaid in maintenance costs since 1992.
He said the Conservatives are denying grain farmers an attempt to get some control over their business.
Prairie Conservative MPs who lobbied Cannon, a West Quebec MP, to kill the deal scoffed at the critics.
David Anderson, southern Saskatchewan MP and parliamentary secretary to the agriculture minister, said farmers wanted a quick decision after almost 10 years of Liberal dithering and they got it.
Asked about Easter’s complaint that the railways have been rewarded for overcharging, Anderson replied: “I guess my question is why the Liberals allowed this to go on as long as they did. We have at least acted to end it.”
Southern Alberta Conservative Ted Menzies said farmers in his riding of Macleod did not support the FRCC deal and he refuses to use the first F in the FRCC acronym – farmer – because he said it was mainly a coalition of rural governments that farmers may or may not support.
“I just don’t think their business plan made sense, buying old cars and adding a layer of bureaucracy to the system,” he said.
Menzies said he also advised Cannon that government support in transferring the rail cars to the coalition could lead the United States to allege a trade-distorting subsidy.
