Decision No. 110-R-2000

February 18, 2000

February 18, 2000

APPLICATION by the Kelowna Pacific Railway Ltd., pursuant to section 91 of the Canada Transportation Act, S.C., 1996, c. 10, for a Certificate of Fitness to operate a railway:

  1. through a lease agreement with the Canadian National Railway Company (hereinafter CN), over trackage collectively known as CN's Okanagan Lines, consisting of CN's Okanagan Subdivision between Kelowna (mileage 85.5) and Vernon (mileage 118.9) and between Armstrong (mileage 70.8) and Campbell Creek (mileage 14.4); and of CN's Lumby Subdivision between Lumby Jct. (mileage 0.0) and Lumby (mileage 14.4); and,
  2. by virtue of running rights ensuing from a Joint Section Agreement between CN and the Canadian Pacific Railway Company (hereinafter CP) dated February 12, 1977, between Vernon (mileage 85.5) and Armstrong (mileage 70.8) on the railway lines of the Okanagan Valley Railway Company (hereinafter OVR), leased by OVR from CP; and between Campbell Creek (mileage 14.4) and Can. Pac. Jct. (mileage 3.5) on the railway lines of CP; and between Can. Pac. Jct. (mileage 3.5) and Kamloops (mileage 0.0) on the railway lines of CN; all said mileages being points on CN's Okanagan Subdivision in the province of British Columbia.

File No. R 8005/K1


The Kelowna Pacific Railway Ltd. (hereinafter KPR) has applied to the Canadian Transportation Agency (hereinafter the Agency) for the Certificate set out in the title. The application was received on November 26, 1999.

The Agency finds, based on the information filed, that there is a close functional relationship between KPR and CN, an existing federal railway undertaking. This relationship extends to the common control over numerous aspects of the proposed KPR operation, including the interchange of rolling stock, service standards, routing, train frequencies, and dispatch on the KPR-held railway lines, as well as reciprocal running rights privileges. The relationship also contemplates a close commercial connection between CN and KPR relative to serving originating and terminating traffic on the leased lines.

Based on these relationships, in combination with the physical connections to CN and CP, the extra-provincial character of portions of the traffic moved, the continuity of service to be offered to customers by KPR and CN on the leased lines, and the common running of CN, CP and KPR trains on certain portions of trackage, the Agency determines that KPR is eligible to receive a Certificate of Fitness under section 92 of the Canada Transportation Act.

The Agency has reviewed the material filed and is satisfied that there will be adequate third party liability insurance coverage for the proposed operation of the railway. The Agency's review of KPR's financial capability to self-insure for the amount of self-insured retention was based on the financial statements of its parent company, KnightHawk Inc., and the indemnity agreement with that parent company in respect of the amount of self-insurance.

Accordingly, the Agency, pursuant to subsections 92(1) and (2) of the Canada Transportation Act, will issue a Certificate of Fitness to the Kelowna Pacific Railway Ltd. which will permit it to operate a railway, through a lease agreement with CN, over trackage collectively known as CN's Okanagan Lines, consisting of CN's Okanagan Subdivision between Kelowna (mileage 85.5) and Vernon (mileage 118.9) and between Armstrong (mileage 70.8) and Campbell Creek (mileage 14.4); and of CN's Lumby Subdivision between Lumby Jct. (mileage 0.0) and Lumby (mileage 14.4); and, by virtue of running rights ensuing from a Joint Section Agreement between CN and CP dated February 12, 1977, between Vernon (mileage 85.5) and Armstrong (mileage 70.8) on the railway lines of the Okanagan Valley Railway Company (hereinafter OVR), leased by OVR from CP; and between Campbell Creek (mileage 14.4) and Can. Pac. Jct. (mileage 3.5) on the railway lines of CP; and between Can. Pac. Jct. (mileage 3.5) and Kamloops (mileage 0.0) on the railway lines of CN; all said mileages being points on CN's Okanagan Subdivision in the province of British Columbia.

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