The issue of hopper car maintenance costs has finally been laid to rest.
The Supreme Court of Canada last week declined to hear an appeal by the two national railways against the calculation of the 2007-08 revenue cap.
As a result, a $72.2 million reduction in the cap, reflecting actual hopper car maintenance costs, will be a permanent part of the annual revenue calculation.
“That’s great news for the farmers of western Canada, as far as I’m concerned,” said Sinclair Harrison of the Farmer Rail Car Coalition.
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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 FRCC was instrumental in uncovering the hopper car maintenance issue when it was bidding to buy the federal government’s fleet of hopper cars several years ago.
Harrison said the end of the legal challenges means that money is now embedded in the revenue cap for as long as it exists.
“Every year farmers will save $72.2 million,” he said, which works out to about $2.60 per tonne based on average grain volumes.
“That’s a big number, and when you look down the road 10 or 15 years and add up the total savings, it’s even bigger.”
The railways had asked the Supreme Court for leave to appeal a Nov. 24, 2008, ruling by the Federal Court of Appeal, which upheld the Canadian Transportation Agency’s calculation of railway costs for the purposes of the 2007-08 revenue cap.
The appeal by Canadian National Railway and Canadian Pacific Railway centred on the CTA’s calculation of the hopper car maintenance costs and the fact that the agency’s decision was retroactive to Aug. 1, 2007.
The Supreme Court declined to provide any reasons for its decision not to hear the appeal.
Both railways say they were disappointed by the decision.
It will free up tens of millions of dollars that have been held in trust by the Western Grains Research Foundation for the past four months.
Because of the hopper car issue, both railways were well over their revenue caps in 2007-08 and had to pay the excess amounts to the WGRF.
However, the money was held in trust pending the outcome of the legal challenge.
CPR was $38.9 million over its cap (including a 15 percent penalty), while CN was $29.9 million over its cap (including penalty.)
Most of that money will now be released to the WGRF but some will be held back pending the outcome of several other court challenges launched by CN against the methods used by the CTA to calculate 2007-08 rail revenues, aside from the hopper car issue.
WGRF executive director Lanette Kuchenski said the agency will have to figure out how much is at stake in those court challenges and ensure enough money is retained.
“We have to determine what impact it might have and how much might have to be paid back to the railways.”
She said that even though the remaining court cases were all launched by CN, the decisions in those cases could also affect CPR’s revenue entitlements.
“We just have to wait to sort it all out,” she said.
