New rail transport bill’s potential discussed by farm economist

Just after Parliament approved a transportation bill, both major Canadian railways announced large investments. Those announcements were no coincidence.

They reflected a new provision dealing with capital costs in Bill C-49, says Derek Brewin, a University of Manitoba agriculture economist.

Under previous legislation, capital investment by either railway was credited to both, he told the Farming for Profit conference in Moose Jaw.

The new act separates the credit to the railway making the investment. CNR and Canadian Pacific Railway have announced almost $1 billion in investments that include 6,900 hopper grain cars.

How Bill C-49 works to control marker power by railways will depend on how the Canada Transport Agency (CTA) uses its new powers, said Brewin. The CTA has greatly expanded powers to collect information from the railways, including some information once collected by the now-defunct Canadian Wheat Board for rail car allocation purposes.

“I think you’re going to see this negotiated between shippers and interested parties over the next few years.” Keeping the Maximum Revenue Entitle- ment (MRE) for grain transport “is a big thing. It is a s big protection from monopoly powers” by the railways.

The MRE acts as an incentive to make the grain transport system less expensive.

Since the MRE in 2000, the system has had significant changes: 67 per cent reduction in number of elevators, 38 per cent increase in carload turnover, 80 per cent increase of inland terminal capacity, and 67 per cent increase in large car train movements.

The inter-switching provision of the new bill allowing some competitors on railway routes could be good or bad.

“If rates are too high there will be no effect. If rates are too low it won’t be ef- fective.”

Regulators must be cautious “cherry-picking” of valuable cargoes by competing railways, he said. “Controlling and being worried about the behaviour of the railways is very important” and has been of concern since 1897.

His market power model showed railways would get $119 a tonne at $300 world grain prices for just over $1 billion profits

At $250 a tonne world price railways would take $80 a tonne for $508 million profits.

Ron Walter can be reached at ronjoy@ sasktel.net