If the Conservative government believes in the open market, it won’t support a continued railway monopoly over rail car repair and maintenance, says the president of the Farmer Rail Car Coalition.
Instead, it will approve the sale of the government rail cars to the FRCC, which in turn will open up repair and maintenance work to competitive bidding.
“What we want to do is open it up to everybody, including the railways if they want to bid,” said FRCC president Sinclair Harrison.
“They’re going to have to compete with the private sector for the business and I would like to think that’s the way the Conservative government would like to see things done, not by a monopoly of the railroads but by putting it out in the open, free enterprise system.”
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The revenue cap provides the railways with $4,329 per car per year for maintenance, according to a 2004 report by the Canadian Transportation Agency, although railways say they don’t receive adequate compensation.
The FRCC says it can get the same work done through tenders for around $1,500 per car per year, an annual savings of $30 million.
In the wake of the election, opponents of the deal to sell the rail cars to the FRCC have called on the new Conservative government to review or reject outright the agreement-in-principle.
The deal to sell the cars was reached between the previous Liberal government and the FRCC. Groups opposing include one of the national railways, grain elevator companies and some farm groups.
Canadian Pacific Railway president Fred Green said last week there is no reason to change the current system, under which the railways receive the cars free of charge from the government and are reimbursed through freight rates for maintenance and repair.
“If there’s an opportunity for the feds to continue with the system that exists and that has worked well for the industry and ourselves, there’s no reason to change it,” he said.
The agreement signed last November would see the FRCC, which is made up of 17 prairie farm, rural and municipal organizations, lease the 12,000 cars for five years, then take ownership over an eight-year period at a cost of $205 million, or about $17,000 per car.
Speaking to reporters at the annual meeting of Agricore United, Green said the deal is a bad one for railways, industry and farmers.
“I think the government should evaluate the deal and I think once they evaluate the deal, they’ll conclude it’s not a terribly good deal,” he said.
The Western Grain Elevator Association and the Western Canadian Wheat Growers Association also want the deal rescinded, saying the system should be either left as is or the cars should be put up for sale again through an open bidding process.
A spokesperson for Canadian National Railway said the company is reviewing the situation but declined further comment.
Wade Sobkowich of the WGEA said selling the cars isn’t necessarily in the best interest of farmers, since they are currently financed by taxpayers at no cost to farmers. The association’s first choice would be status quo, combined with a new government plan for renewing and replacing the fleet.
“If you truly wanted to do what’s in the best interest of farmers, the government would continue to own the cars and lease them to the railways at the least cost,” he said.
Harrison said the railway opposition to the sale is driven purely by financial self-interest, given the generous payments they receive for repair and maintenance.
“If they can somehow scuttle this deal, it’s money in their pockets.”
Green said the railways and the FRCC have been unable to come to an operating agreement, with the main issue being repair and maintenance.
Harrison said the failure to reach an agreement is the fault of the railways, suggesting they delayed negotiations in anticipation of a Conservative election victory.
“We’ve asked both railroads to sit down with us and go through our maintenance plan so it works for them. We’re still waiting for them.”
A CPR spokesperson denied the railway is to blame, saying the company met with FRCC in late December and has been working for months with Transport Canada and the coalition to reach an operating agreement.
One issue raised by Green last week was how the railway would move damaged cars from isolated Prairie locations to repair shops.
Green told reporters he understands FRCC plans to send damaged cars to non-union repair shops in the United States, a claim that was categorically denied by Harrison.
