Seven Saskatchewan municipalities trying to buy their local branch line were leaving no stone unturned in their battle to save rail service for area farmers.
They were even ready to turn to England’s famous, and long dead, Virgin Queen for help.
During closing arguments at a Canadian Transportation Agency hearing last week, lawyers for the municipalities dusted off the law books and brought up the Statute of Elizabeth, passed in 1601.
That obscure law, which defined the repair of roads, highways and bridges as being charitable works, probably won’t make or break the municipalities’ case.
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But it does indicate the future of the Cudworth subdivision will depend as much on detailed and technical legal arguments as it will on the more straightforward issue of whether local farmers need rail service.
The seven municipal governments have agreed to purchase from CN Rail the 74 kilometre stretch of line that serves an area northeast of Saskatoon.
But they have asked the CTA to exclude from the purchase price the value of assets put into the line under the federally funded branch-line rehabilitation program. The agency reserved judgment following a five day hearing in Saskatoon last week.
During the 1970s and 1980s, Ottawa spent more than $600 million to fix dilapidated branch lines in Saskatchewan, including $12 million on the Cudworth sub. The municipalities say the railways shouldn’t profit from the sale of those assets, which were paid for by Canadian taxpayers.
The precedent-setting decision will have far-reaching impacts, the agency was told.
“The case before you today is critically important to the economic welfare of a great number of farmers in Western Canada,” said Ron Gleim, chair of the Western Rail Coalition, which represents 22 short-line groups.
“We don’t think it unfair or melodramatic to say that for some farmers, particularly those in regions far from main rail lines, the outcome … could well determine whether they have a future in agriculture.”
Short-line advocates say if the municipalities lose, local groups that want to set up short-line operations won’t be able to afford to do so.
The Canada Transportation Act requires the railways to transfer lines to municipal governments for net salvage value. Once the agency has ruled on the rehab assets issue, it will determine the net salvage value of the Cudworth sub. CN has quoted a purchase a price of $3.2 million.
The municipalities argue that the railways didn’t pay to put in the rehab assets, and shouldn’t realize any financial benefit.
“CN should not be allowed to reap a windfall gain from selling those assets,” lawyer Jim Foran told the five-member CTA panel during closing arguments, calling the railways a “conduit” for the benefits to flow to producers.
Not in black and white
The railways argue that the rehab agreements say nothing about the program being designed to benefit farmers. The agreements also say nothing about who owns the rehab assets.
But CP Rail lawyer Marc Shannon said the line renovations were designed to improve the grain transportation system in Western Canada, adding that would include the railways but not municipal governments.
The railways say rehab money was given as grants, with no strings attached, and they own the assets that were purchased with those grants. Municipalities say the agreements directed the railways to spend the money on specific work on specific stretches of track.
The railways also argued that there is no dispute between the two parties who signed the rehab agreements (the railways and Ottawa), and the municipal governments had no legal standing to intervene in those contracts.
The hearings were marked by technical legal arguments over such things as the difference between ownership and beneficial ownership, the definition of entitlement and what exactly is a grant.
