Regulation of Maximum Revenues for the Rail Transportation of Western Grain

Bill C-34, an Act to amend the Canada Transportation Act, was given Royal Assent on June 29th, 2000, thereby bringing into force, effective August 1, 2000, a new regime for the regulation of maximum rail revenues for the rail transportation of western grain. Consequently, the Canadian Transportation Agency (the Agency) no longer establishes maximum rates for the movement of western grain. Prescribed railway companies (currently CN and CP) now have the freedom to set their own rates, subject to two conditions: a branchline versus mainline rate differential, and a maximum revenue entitlement (called the Revenue Cap) which cannot be exceeded.

Eligibility Criteria

The rates apply to the movement of eligible grain, as set out in Schedule II of the Canada Transportation Act, by a prescribed railway company from any point west of Thunder Bay or Armstrong, Ontario. The rates are applicable to railway shipments destined for offshore export at Thunder Bay or Armstrong, Churchill, Manitoba, or a port in British Columbia, as well as domestic movements to Thunder Bay and Armstrong. They also apply to export movements to the U.S. (by rail only) through Thunder Bay and Armstrong.

Summary

Effective August 1st, 2000, CN and CP set their own rates for the movement of western grain. However, Subsection 149(2) of the Canada Transportation Act states that single car rates for branchline origins cannot exceed rates for mainline origins, under similar circumstances, by more than 3%. A second and more substantive condition stems from Subsection 151(1) of the Canada Transportation Act which states that a railway company's revenues, as determined by the Agency, for the movement of grain in a crop year may not exceed the company's Revenue Cap for that year. If the Agency determines that a railway has exceeded its Revenue Cap for the crop year, the railway must repay the excess amount and any penalty.

The Revenue Cap for a given crop year must be derived using base year information.  For each crop year starting with 2000-2001, the Agency will adjust each railway's base year revenue figure to reflect inflation, the actual tonnage moved and the actual average length of haul. The Agency must determine the level of inflation by April 30th before the crop year begins, and will determine the actual tonnage moved and the actual length of haul before December 31^st after each crop year ends. These determinations will be input to a formula set out in Subsection 151(1) of the Canada Transportation Act to generate each railway's Revenue Cap.

Manitoba Contact(s):
See National Contact.

National Contact(s):
Mr. Neil Thurston
Director
Rail Economics Directorate
Rail and Marine Branch
Canadian Transportation Agency
Terrasses de la Chaudière
15 Eddy Street
Gatineau, Quebec  K1A 0N9
Telephone: 819-997-4914
Fax: 819-953-5564