Decision No. 26-R-2018

March 27, 2018

APPLICATION by Parish & Heimbecker Ltd. (P&H) against Goderich-Exeter Railway Company Limited (GEXR) pursuant to subsections 116(1) and 120.1(1) of the Canada Transportation Act, S.C., 1996, c. 10, as amended (CTA).

Case number: 
17-04035

SUMMARY

[1] P&H filed an application with the Canadian Transportation Agency (Agency), arguing that a surcharge implemented by GEXR in its updated Tariff 7006-14 (Tariff) is unreasonable, and contrary to theCTA. The Tariff, which became effective on June 1, 2016, imposes a $10,000 per car surcharge for all traffic to or from Centralia, Ontario. P&H further alleges that GEXR is in breach of its level of service obligations under sections 113 to 116 of the CTA by failing to maintain its railway line to a standard suitable for safe operation.

[2] P&H requests that the Agency order GEXR to remove the surcharge and repair the railway line so that it can, should the need arise, ship products to and from Centralia.

[3] GEXR submits that the surcharge is a commercially fair and reasonable term for undertaking the movement of traffic on an unused and neglected end of a line, which it argues is a spur. GEXR further submits that although the line is currently not able to accept traffic for carriage, the company is not in breach of its level of service obligations under section 113 of the CTA, as its obligations were not properly triggered by P&H. GEXR asks that the application be dismissed.

[4] The issues to be addressed in this case are:

  1. Is the $10,000 per car surcharge imposed by GEXR a “charge” within the meaning of section 120.1 of the CTA, and if so, is it unreasonable?
  2. Is GEXR in breach of its level of service obligations, pursuant to sections 113 to 115 of the CTA, by failing to maintain its track conditions to a level that is suitable for the carriage of traffic?

[5] For the reasons outlined below, the Agency finds that:

  1. The $10,000 surcharge is not a charge and therefore not eligible to be the subject of a complaint under section 120.1 of the CTA; and,
  2. GEXR is not in breach of sections 113 to 115 of the CTA as its level of service obligations have not been properly triggered.

BACKGROUND

[6] On August 14, 2017, P&H filed an application with the Agency against GEXR. In its application, P&H argues that a $10,000 surcharge imposed by GEXR is unreasonable. P&H further argues that GEXR is in breach of its level of service obligations, pursuant to sections 113 to 115 of the CTA, by failing to ensure that the railway line is maintained to a standard suitable for safe operation. P&H requests that GEXR be ordered to remove the surcharge and repair the track so that railway operations may resume.

[7] P&H maintains a grain elevator in Centralia. From this location, P&H receives grain from producers in southwestern Ontario and ships it to various locations. This facility also receives fertilizer.

[8] The grain elevator is located six miles south of Exeter. Rail service to this location is provided by what GEXR calls the “Exeter Spur”, which runs from Clinton, Ontario to Centralia (P&H refers to the track as the Exeter Subdivision). The line connects with the Goderich Subdivision, then to GEXR’s main line at Stratford, Ontario, and then on to an interchange with the Canadian National Railway Company (CN). The application relates specifically to the 5.6 mile portion of track between Exeter and Centralia. P&H is the only shipper on this portion of the track.

[9] Between 2007 and 2010, P&H shipped over 300 cars per year by rail. In subsequent years, the number of shipments declined. In 2012, over 160 cars were shipped by rail, and in 2015, 13 cars were shipped by rail. P&H has not shipped any product by rail since 2015. P&H suggests, however, that it might have shipped as many as eight cars were it not for the $10,000 surcharge that GEXR introduced in June of 2016.

THE LAW

Unreasonable charges or terms

[10] Subsection 120.1(1) of the CTA states:

If, on complaint in writing to the Agency by a shipper who is subject to any charges and associated terms and conditions for the movement of traffic or for the provision of incidental services that are found in a tariff that applies to more than one shipper other than a tariff referred to in subsection 165(3), the Agency finds that the charges or associated terms and conditions are unreasonable, the Agency may, by order, establish new charges or associated terms and conditions.

[11] Subsection 120.1(7) of the CTA states that “For greater certainty, this section does not apply to rates for the movement of traffic.”

Level of services

[12] Sections 113 to 116 of the CTA establish a railway company’s level of service obligations with respect to traffic offered for carriage on the railway. These sections are little changed from the Railway Clauses Consolidation Act, 1851, 14 – 15 Vict, c. 5 and have been reviewed many times by Parliament.

[13] Sections 113 to 115 of the CTA state that a railway company shall provide, according to its powers, adequate and suitable accommodation for the receiving, loading, carrying, unloading and delivering of all traffic offered for carriage on its railway.

[14] Section 116 of the CTA requires the Agency to investigate complaints made by any person alleging that a railway company is not fulfilling its service obligations. If a railway company is found to not have fulfilled its level of service obligations, the Agency has the power to order a variety of remedies.

Track determination

[15] Subsection 140(2) of the CTA provides that the Agency may determine, as a question of fact, what constitutes a yard track, siding, or spur or other track auxiliary to a railway line. This can be demonstrated through evidence provided by the parties on the conditions and operation of the trackage concerned.

IS THE $10,000 PER CAR SURCHARGE IMPOSED BY GEXR A “CHARGE” WITHIN THE MEANING OF SECTION 120.1 OF THE CTA, AND IF SO, IS IT UNREASONABLE?

Positions of the parties

P&H’S POSITION

[16] P&H submits that the $10,000 per car surcharge is prohibitively expensive, economically unfeasible, and unreasonable. According to P&H, the surcharge is equal in cost to moving a rail car between Exeter and Centralia 22 times. P&H states that GEXR’s Tariff provides no indication of what a shipper gets by paying the surcharge. P&H requests that the surcharge be removed.

GEXR’S POSITION

[17] GEXR submits that the Agency does not have the jurisdiction to either assess the Tariff surcharge or provide P&H with the relief it is seeking.

[18] Section 120.1 of the CTA, GEXR argues, is only applicable if the Tariff applies to more than one shipper. According to GEXR, as P&H is the only shipper operating in Centralia, it does not meet this requirement. GEXR also argues that subsection 120.1(7) of the CTA specifically excludes rates from being the subject of a dispute under section 120.1. According to GEXR, the $10,000 per car surcharge is a component of the rate for the movement of traffic such that section 120.1 is not applicable.

ANALYSIS AND DETERMINATIONS

[19] The Agency can only consider the reasonableness of the $10,000 per car surcharge if that surcharge is captured by section 120.1 of the CTA.

[20] GEXR’s first argument, that section 120.1 of the CTA is not applicable because P&H is the only shipper to which the Tariff applies, is unconvincing. While P&H is the only shipper operating on the portion of track between Exeter and Centralia, the Tariff applies to all traffic to or from Centralia. Thus, it applies equally to the receiving of goods.

[21] GEXR’s second argument, based on subsection 120.1(7) of the CTA, raises the question of what distinguishes a “rate” from a “charge”. The Agency has previously considered this question in Decision No. 388‑R‑2013. In that decision, the Agency found that while a rate is an amount paid by a shipper in exchange for the movement of the shipper’s traffic, a charge is incidental, optional, or ancillary, and relates to specific activities or transactions that are debundled from the rate for the movement of goods. The question therefore is whether the $10,000 surcharge relates to an incidental, optional, or ancillary service.

[22] GEXR argues that the surcharge is a component of the rate for the movement of traffic, which is consistent with P&H’s observation that GEXR’s Tariff includes no indication of the benefit or service that the $10,000 surcharge provides to the customer. This suggests that the surcharge is not related to an incidental, optional, or ancillary service, but rather, is a component of the rate for the movement of traffic. While rates can be the subject of a request for final offer arbitration under subsection 161(1) of the CTA, they cannot be the subject of a complaint filed under section 120.1. Accordingly, this portion of P&H’s application is dismissed.

IS GEXR IN BREACH OF ITS LEVEL OF SERVICE OBLIGATIONS, PURSUANT TO SECTIONS 113 TO 115 OF THE CTA, BY FAILING TO MAINTAIN ITS TRACK CONDITIONS TO A LEVEL THAT IS SUITABLE FOR THE CARRIAGE OF TRAFFIC?

Positions of the parties

P&H’S POSITION

[23] P&H submits that the requirement in subsection 113(1) of the CTA for a railway company to provide “adequate and suitable accommodation” for traffic includes an obligation to maintain tracks to a state where they can accommodate traffic for carriage. P&H submits that by neglecting the track, GEXR has failed to meet this obligation, and is therefore in violation of subsection 113(1). According to P&H, if GEXR wishes to relieve itself of its level of service obligations under subsection 113(1), it may do so by following the process under the transfer and discontinuance provisions found in Division V of the CTA.

GEXR’S POSITION

[24] GEXR acknowledges that the portion of track between Exeter and Centralia is in need of significant capital investment before it can accommodate traffic for carriage. GEXR contends, however, that the railway track between Exeter and Centralia is a “spur” and states that, “Exercising its prerogative GEXR took steps before this complaint was filed to change the track designation to a spur.” It submits that as a spur, the portion of track in question is not subject to the discontinuance provisions under Division V of the CTA nor any requirements to make investments to comply with Division IV.

[25] According to GEXR, the following characteristics make the railway line between Exeter and Centralia a spur:

  • It is stub-ended and only approximately 5.6 miles long;
  • It connects with other track at one end;
  • It has had no substantial revenue since 2012; and,
  • It has a timetable speed restriction of 10 mph and maximum gross weight of 268,000 lbs.

[26] GEXR also indicates that no traffic has been offered for carriage since 2015 when it transported 13 cars. GEXR further indicates that the line is not located in a metropolitan area or an area served by an urban transit authority.

[27] GEXR submits that irrespective of whether the line is a spur, it cannot be in violation of section 113 of the CTA unless its level of service obligations have been properly triggered by a shipper offering traffic. GEXR submits that P&H has provided no evidence to indicate that it offered traffic for carriage, except for its suggestion that it might have shipped eight cars were it not for the $10,000 surcharge. This, according to GEXR, is insufficient to trigger its level of service obligations.

ANALYSIS AND DETERMINATIONS

[28] GEXR’s first argument is that certain characteristics of the portion of track, such as its length, connection to other track, lack of revenue, and speed restriction, are demonstrative of a spur. However, there are other factors that suggest that the portion of track is more properly understood as the last section of a main line. Decision No. 552-R-1998, which granted GEXR its certificate, did not describe the line from Clinton to Centralia as a spur. In 1987, the last time the operation of a portion of the Exeter Subdivision was discontinued, CN, the owner of the track at the time, filed an application with the Railway Transport Committee pursuant to section 253 of The Railway Act, requesting permission to abandon the operation of a “branch line”. Further, the evidence does not demonstrate that there are physical characteristics distinguishing the portion of track between Centralia and Exeter from the rest of the line up to Clinton. The track instead appears to be one continuous line from Centralia to Clinton, which then goes to the Goderich Subdivision, then to the GEXR main line at Stratford, and then to the interchange with CN.

[29] GEXR’s contention that the portion of track between Exeter and Centralia is a spur is therefore not persuasive. The Agency reminds GEXR that the CTA does not permit a rail carrier to unilaterally re-designate a portion of track as a spur, that Division V of the CTA prescribes the process that a railway company must follow if it wishes to discontinue or transfer the operation of a line, and that if a railway company intends to continue operating a line rather than discontinue it, it must be able to meet its obligations under Division IV.

[30] GEXR’s second argument is that the level of service provisions have not been triggered. The issue here is whether possible or potential traffic is sufficient to trigger a rail carrier’s service obligations, given that P&H states that were it not for the $10,000 surcharge, “possibly up to 8 cars could have been shipped into Centralia.”

[31] In Decision No. 442-R-2008, the Agency provided detail on what it considers to be “traffic”, finding that the traffic offered for carriage must be actual traffic and not merely proposed traffic. In that case, the applicant, who was developing an industrial park, requested a rail spur connection, arguing that it might be able to attract a client who would have traffic to offer if the site had rail access. The nature of the traffic and the client were unknown. The Agency rejected the notion that such speculative traffic would create an obligation. The Agency noted that with respect to traffic “offered for carriage”, the term is not defined in the CTA but has, through various decisions issued by the Agency and its predecessors, been interpreted to mean actual traffic as opposed to potential traffic. The Agency explained that while traffic need not be “immediately available”, it does need to be more than “proposed”. The Agency found that while the applicant in that case had offered potential traffic, it had not provided any specific evidence of actual traffic to be offered for carriage. Accordingly, the Agency found that the respondent was not in breach of its level of service obligations under sections 113 to 115 of the CTA.

[32] In the present matter, P&H submits that the surcharge has prevented an offer of traffic for carriage. However, P&H has indicated only that “possibly up to 8 cars could have been shipped into Centralia.” This, the Agency finds, is too speculative to be considered an offer of traffic for carriage. Accordingly, the Agency finds that as there has been no traffic offered for carriage, GEXR’s level of service obligations have not been triggered.

CONCLUSION

[33] The Agency finds that:

  1. The $10,000 surcharge is not a charge within the meaning of section 120.1 of the CTA; and,
  2. GEXR is not in breach of sections 113 to 115 of the CTA as its level of service obligations have not been properly triggered.

Member(s)

Scott Streiner
P. Paul Fitzgerald
William G. McMurray
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