With new law passed, CN to purchase hundreds of grain cars

MONTREAL — Canadian National Railway is preparing to purchase hundreds of new grain hopper cars to get shipments moving after a bill that encourages railways to make investments to avert service disruptions became law Wednesday.

CN Rail expects to buy new grain cars to replace some 200 to 300 that are replaced annually, its chief financial officer told an investor conference Wednesday, before the bill that imposes financial penalties on railway companies received royal assent.

Ghislaine Houle explained that the company was waiting on the passage of the omnibus bill to go out and buy the cars.

The wide-ranging Transportation Modernization Act includes financial penalties for railways that fail to deliver promised rail cars for grain shipments on time. It also requires railways to publicly report each summer on their abilities to move that year’s grain crop, and to publish by Oct. 1 each year a winter contingency plan for keeping shipments moving regardless of bad weather.

The bill’s passage comes after Canadian Pacific Rail and Canadian National blamed severe winter weather and a largerthan-expected grain crop for a backlog in grain shipments that have hit their profits and left grain farmers complaining about their service.

It also requires the installation and use of locomotive voice and video recorders,the replacement of temporary extended interswitching with long-haul interswitching, and changes the grain cap to encourage hopper investments.

Houle said the maximum revenue entitlement system — which places a ceiling on the total revenue to be earned from moving grain by rail in any crop year — has been a disincentive to invest. “That now fixes it where if we invest in grain cars, we’ll get 100 per cent of our investment coming to us,” he said.

The act raises the individual ownership limit in Canadian National Railway to 25 per cent, from 15 per cent. That could open the door for billionaire Bill Gates to increase his stake.