OUTLOOK, Sask. – Critics of the 10-cents-a-tonne surcharge to fund two prairie short line railways don’t know what they’re talking about, says the general manager of one of the companies.
Paul Beingessner, general manager of Southern Rails Co-operative Ltd., said the payment is simply an extension of the existing system of subsidizing shipments off lesser-used branch lines.
“People look at this wrongly as a subsidy to the short line,” he said. “This is a subsidy to the producer who hauls to the short line.”
That puts that producer on equal footing with someone hauling to any other branch lines, whose rates are subsidized by those who deliver to elevators on the main line.
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“Every branch line in the current system, because of distance-related rates, is subsidized by everybody who hauls to a main line,” Beingessner said last week. “That’s the nature of our system. It’s been there for 70 years and yet a lot of people don’t seem to be aware that it exists.”
A farmer hauling grain to Moose Jaw will pay about $30 a tonne in freight after Aug. 1, even though the actual cost of shipping that grain to port is probably around $25, he said. Meanwhile, a farmer hauling to Fife Lake will also pay $30 tonne even though the actual cost is closer to $45.
“So one farmer is subsidizing another in the system and we acknowledge that,” he said.
After the federal government amended its transportation reform legislation by adding 10 cents a tonne to the cost base to help pay for the operations of Southern Rails and Central Western Railway Corp., a number of farm groups and grain industry organizations publicly complained about the change.
Opposed to subsidies
Opposition was especially strong in Manitoba, since the two short lines operate in Saskatchewan and Alberta respectively. The critics said they don’t oppose short lines but the lines should have to make it without relying on subsidies.
Beingessner said he’s annoyed at bad press the short lines companies have received as a result.
When the short line companies were created in the 1980s, the costs of operating those lines were taken out of the cost base used to calculate freight rates. That meant a saving of about 17 to 20 cents a tonne for all grain shippers.
With the end of the Western Grain Transportation Act and the Crow Benefit payment, the short lines were supposed to get their money from a revenue division agreement with the national railways. But the “pot of costs” used to set the rate no longer included the 17 to 20 cents a tonne of short line costs.
The 10 cents a tonne payment is designed to provide CN and CP with revenue that can then be turned back to the short lines through a revenue division.
If farmers who haul to a short line had to pay the full cost of moving that grain to the CN/CP interchange, as well as the rate to the port, that would put those farmers at a disadvantage to producers on an adjacent line who pay only the distance-related rate.
“It would have been quite unfair and thank goodness it’s been remedied,” said Beingessner.
