The federal government will sell its fleet of grain hopper cars this
year.
And a coalition of prairie farm groups thinks it should be given the
first shot at buying the 13,000 cars.
“Our preference is to have the government sell them to the farmers and
not put them up for bid,” said Sinclair Harrison, chair of the Farmer
Rail Car Coalition.
Late last month Transport Canada sent a letter to potential buyers
saying it has resurrected its plan to sell the cars, first announced in
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federal government proposed several months ago to increase the compensation rate from 80 to 90 per cent and double the maximum payment from $3 million to $6 million
the 1996 federal budget.
It asked the groups to respond by April 22 with their thoughts on what
the sale terms and conditions should be.
Harrison said if the government doesn’t want to sell the cars directly
to the farmer coalition, it should at least ensure that grain farmers
benefit from the millions of dollars they’ve invested in the purchase
and maintenance of the cars.
“Certainly we would hope that one condition put on them is that they’re
dedicated to western grain service,” he said. “We, as farmers, feel
we’ve paid for them at least once, maybe twice.”
Other potential buyers include railways, rail car leasing companies,
grain companies, the Canadian Wheat Board, provincial governments or
individual entrepreneurs.
Transport Canada said it is open to all suggestions from stakeholders.
“We’re not going to pre-judge the process,” said Brian McGregor.
“We’re looking to dispose of them later this year and will take it from
there.”
The Farmer Rail Car Coalition, made up of seven prairie farm
organizations, was formed to make a bid on the cars following the
government’s original announcement more than five years ago.
However the government didn’t proceed with its plan after determining
that the two national railways had first right of refusal on the cars
for five years, followed by a six-month grace period. With that right
of refusal period now expired, the government has decided to move ahead
and sell the cars.
At the time of the original announcement, the value of the cars was set
at around $400 million by independent appraisers.
Harrison said that with six more years of depreciation on the cars,
plus the fact the North American market for rail cars is soft, the
price should be considerably lower.
“I think it’s reasonable to assume it would be at least half, or
perhaps one quarter, of what it was in 1996,” he said. “So it appears
from our standpoint it may be a good time to be purchasing.”
But he said the coalition’s plans will be determined by the terms
attached to the sale, such as whether the cars are sold in large or
small blocks.
Harrison said the coalition would have to own all or most of the cars
in order to be able to use them to influence grain transportation for
the benefit of farmers.
“We don’t want to use them to micro-manage or confuse the
transportation issue,” he said. “But we’d want to work with the
railways and others in the grain industry to improve things like
turnaround time and efficiency.”
No matter who buys the cars, a surcharge will be attached to the
freight rate to pay for them.
Harrison expects the government will probably want to set conditions
that will enable it to get the highest possible price for the cars,
which may work against the coalition’s chances. For example, if the
cars have to be dedicated to western grain service, that could reduce
their value to rental companies and railways.
