An agreement to transfer 12,400 grain hopper cars from the federal government to the Farmer Rail Car Coalition should be ready to put before federal cabinet for approval next month.
If the agreement is approved, the cars could be in the hands of the farmer-owned corporation early in 2006.
Officials from Transport Canada were scheduled to meet with FRCC in Regina Sept. 7-8, after Western Producer deadlines for this issue, for what FRCC president Sinclair Harrison hoped would be among the last negotiating sessions in what has been a long and arduous process.
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“With that meeting, plus one more, hopefully a final agreement can be drafted,” he said.
“It’s just a question of locking ourselves in a room, sorting through it with the lawyers and getting it finalized.”
That would enable the agreement to be presented to the federal cabinet and Treasury Board sometime in October.
A transfer would not be effective immediately, however. The government is required to give the national railways 90 days notice of a change in ownership. In addition, the FRCC would need time to set up an office and hire staff.
Harrison, who met with ministers during the recent federal cabinet meeting in Regina, was encouraged by the response.
“We’re always trying to push this ahead and I sensed the same from the (transport) minister,” he said.
Among the unresolved issues going into this week’s meeting was the question of the price tag to be attached to the cars.
The deal offered by the federal government is a five-year lease-to-purchase arrangement. The FRCC would manage the cars, which would continue to be owned by Ottawa, for five years and pay an annual lease fee. Assuming the government is satisfied with the job done by the FRCC, the coalition would assume ownership at the end of five years.
The FRCC has argued through the process for a minimal fee, saying every dollar sent to Ottawa is one less dollar for car maintenance, refurbishment and replacement.
On the other side, federal officials say the cars are a taxpayers’ asset that provides the government with about $13 million a year in revenue from non-statutory commercial movement to the United States, Mexico, Eastern Canada in the winter and domestic destinations.
While the issue has not been resolved, that could translate into a lease fee based on that $13 million.
Harrison said the coalition would still prefer a nominal fee, but “on the other hand there is an offer that’s on the table and we want to make it work.”
He added that any lease fee paid should be a credit against whatever purchase price is attached to cars after five years.
Meanwhile, the FRCC is also involved in discussions with Canadian National Railway and Canadian Pacific Railway over lease fees and the division of cars. Those lease fees will provide FRCC with revenue for administration and car maintenance, as well as a reserve fund for future fleet replacement.
However, those negotiations can’t be completed until the Canadian Transportation Agency finishes a review of how the rail revenue cap will be affected by the change in ownership, the potential removal of car maintenance costs from the cap and the potential addition of ownership costs such as lease fees.
“The railways won’t sign anything until they know the effect on the revenue cap,” said Harrison.
An industry meeting on the issue is scheduled for Sept. 9 in Winnipeg.
CTA spokesperson Jim Riegle said the agency expects to complete the review and present a report to Transport Canada in October.
