Canada’s two national railways overcharged prairie farmers by some $4.2 million for hauling grain in the 2005-06 crop year.
The Canadian Transportation Agency last week released figures showing that the Canadian National Railway’s revenue from hauling statutory grain during the year was $2.7 million greater than its revenue cap limit, while
Canadian Pacific Railway was $1.5 million above its cap.
CN was 0.68 percent above its cap figure of $395.7 million and CPR was 0.37 percent above its limit of $395 million.
While farmers won’t be happy about paying $4.2 million more in rail freight, they may find consolation in the fact that the railways don’t get to keep the overpayment.
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They are required by law to pay excess revenue, plus a five percent penalty, into the coffers of the Western Grains Research Foundation.
As a result, the farmer-run research funding agency’s $9 million endowment fund will be getting an unexpected cash infusion of more than $4.4 million, an increase of nearly 50 percent.
“All I can say is that is really a lot of money,” said foundation chair Keith Degenhardt of Hughenden, Alta. “This really does astound me.”
The endowment fund’s annual investment earnings are used to finance a wide range of research. In recent years that has worked out to about $400,000 to $600,000 a year, enough to fund five or six projects.
The endowment fund is separate from the wheat and barley checkoff, also administered by the WGRF.
“In the long term this will be good news for farmers, who will benefit directly from the additional research,” said Degenhardt.
This marks the third time one railway or another has exceeded the cap since it was introduced in 2000 and the first time both have done so in the same year.
Previously, CPR exceeded it by $320,000 in 2003-04, and CN by $119,000 in 2004-05.
CPR spokesperson Ed Greenberg said that given the complexity and difficulty of trying to forecast grain movement and markets, the railways have done well in living within the revenue cap, determined annually by the CTA.
“When you take everything into account, a 0.3 percent variance on an overall allowance of $395 million is very small,” he said.
Over the life of the revenue cap, CPR is a net $16.8 million below its allowable limit, he said.
Greenberg added CPR is reviewing the basis for the CTA’s decision and could challenge it in the Federal Court of Appeal. The railways have 30 days in which to launch an appeal. If that doesn’t happen, the railways are required to make payment to the WGRF within 30 days.
CN officials could not be reached for comment by the deadline for this story.
Jim Riegle of the CTA’s costing division said one reason the railways exceeded their caps was a series of decisions made by the agency on the issue of what exactly comprises railway revenue.
The most contentious issue involved changes in CN’s rules for collecting demurrage fees from grain shippers at terminal positions.
The agency determined that even though income from reasonable demurrage is not considered to be revenue in calculating the cap, CN’s changes were unreasonable, could not be considered as demurrage and so counted against the cap.
