Grain farmers and shippers should welcome the proposed merger of CN Rail and Burlington Northern Santa Fe, says CN president Paul Tellier.
“This transaction is not going to affect the grain sector,” Tellier said last week. “If it does, it will be to increase efficiency.”
CN and Burlington Northern Santa Fe want to combine their operations and create a new company called North American Railways Inc.
The proposal has been sidetracked by the United States Surface Transportation Board, which last month declared a 15-month moratorium on rail consolidation while it considers new merger rules.
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CN and BNSF are fighting that ruling in the U.S. Court of Appeals and expect a decision in late May or early June.
The proposed new company would be the continent’s biggest railway and the dominant carrier in the grain-growing areas of Western Canada and the U.S. northern Great Plains.
Some analysts say that could threaten the future of CP Rail and result in reduced competition, service cuts and higher costs for grain shippers.
But Tellier insists that won’t be the case. Right now, he said, 85 percent of the grain delivered to elevators on CN lines is located within 80 kilometres of a CP Rail line.
“So today there is competition and tomorrow, if BNSF and CN are put together, there would still be competition,” he said in a telephone interview during a break in CN’s annual meeting of shareholders in Montreal.
Tellier said there has been a lot of misinformation and misunderstanding about the impact of the proposed merger on grain transportation.
For example, he dismissed fears expressed by some Canadian grain shippers that if a merger was to take place, the new rail company would favor BN lines running from the northern Great Plains to U.S. west coast ports over the CN lines across the Canadian Prairies.
The CN line is a better line, is closer to the West Coast and has better track grades than the American route, he said.
Tellier and other CN officials have met with a number of grain industry and shipper groups over the last few months to try to assuage concerns about the impact of the proposed merger.
CN spokesperson Jim Feeny said the company is telling its customers that the new super-railway would offer more choices and more competition without changing the basic patterns of grain movement off the Prairies and the U.S. Great Plains.
“When we first announced the deal, there was an initial reaction from some quarters that was very negative , that this would be bad for grain industry,” Feeny said in an interview from Montreal. “That’s what we’re trying to correct. It’s not going to be bad.”
Some prairie grain shippers and farm groups have used the proposed merger in their campaign against the recommendations of the Kroeger report that would deregulate the grain handling system.
Grain farmers are captive shippers with no access to competitive rates, they say, and need the protection of government regulations.
Tellier rejected that approach, saying he has been arguing for some time that grain should be dealt with on the same basis as any other commodity.
The best way to have an efficient handling and transportation system, he said, is to run it on a commercial basis with all the players held accountable for their performance.
He added that the review of grain transportation policy has gone on long enough.
“I’m doing my best to control my frustration,” he said. “I’m just hopeful that the cabinet in its deliberations will move towards greater commercialization because Kroeger has suggested this and Estey has suggested this.”
