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Canadian railroads exceed caps on grain revenue

Canada’s two national railways generated too much revenue from western grain hauling in the last crop year and will have to pay fines, a federal agency ruled on Dec. 30.

Canadian National Railway exceeded its $409 million cap by nearly $26 million while Canadian Pacific Railway was nearly $34 million over its $374 million cap, according to the Canadian Transportation Agency.

The companies have 30 days to pay the money plus 15 per cent fines to the Western Canadian Grains Research Foundation, which funds research projects on behalf of Prairie wheat farmers.

It means the Western Grains Research Foundation (WGRF) will receive approximately $68 million from the two major Canadian rail companies.

This is the largest amount that any railway has exceeded its revenue cap. These large overages reflect the actual costs incurred by CN and CPR for the maintenance of grain hopper cars and reduces the historical maintenance costs that were “embedded” in the revenue caps.

The decision comes after the railroads unsuccessfully filed a court challenge of the agency’s decision to reduce the maximum amount of money the carriers could generate from hauling Prairie grain to export harbours.

The agency had cut the rate after deciding CP and CN were overestimating the amount of money they needed to spend to maintain Canada’s federally owned fleet of grain-hauling hopper cars.

Un d e r the Canada Transportation Act, amounts received by the railways for grain movement in excess of the revenue cap are paid into the WGRF Endowment Fund. The interest earned on the Endowment Fund is used to support all types of crop research. When the act was passed, the WGRF Endowment Fund was deemed by the federal government to be a logical place for these producer dollars. Administrative costs would be high to return the money directly to producers and it would be difficult to do this equitably. By funding a variety of research projects on all types of crops, the money benefits all crop producers in the Prairie region.

“We realize these are farmer dollars,” notes Lanette Kuchenski, WGRF executive director in a release.

“We’re often asked why the excess railway funds can’t be returned to individual producers. WGRF is not in a position to change legislation and I don’t believe it was ever envisioned when this legislation was passed that the excess revenue cap dollars would ever be this high.”

This is by far the largest payment ever received from the railways.

“Until all of the court proceedings are final, the WGRF will hold the money in trust. In previous years, some of the funds awarded to WGRF have had to be returned to the railways,” she said.

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