Ottawa to sell rail cars this year

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Published: April 11, 2002

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.

About the author

Adrian Ewins

Saskatoon newsroom

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