Decision No. 400-R-2015

December 29, 2015
DETERMINATION by the Canadian Transportation Agency of the Western Grain Maximum Revenue Entitlements for the movement of western grain by prescribed railway companies for crop year 2014 2015.
DETERMINATION by the Canadian Transportation Agency of a prescribed railway company’s revenue for the movement of western grain for crop year 2014-2015 and whether a prescribed railway company’s western grain revenue exceeds its corresponding Maximum Revenue Entitlement, pursuant to sections 150 and 151 of Division VI, Part III of the Canada Transportation Act, S.C., 1996, c. 10, as amended.
Case number: 
15-00046

INTRODUCTION

[1] This Decision provides the Canadian Transportation Agency’s (Agency) determinations of the Western Grain Maximum Revenue Entitlements (MRE), and revenue for the movement of western grain by prescribed railway companies for crop year 2014-2015. These determinations are necessary to ensure that a prescribed railway company’s western grain revenue does not exceed its MRE. If a prescribed railway company’s revenue exceeds its MRE, the company must pay out the excess amount and penalties, as specified in the Railway Company Pay Out of Excess Revenue for the Movement of Grain Regulations, SOR/2001-207 (Regulations). There were two prescribed railway companies during the 2014-2015 crop year: the Canadian National Railway Company (CN) and the Canadian Pacific Railway Company (CP).

[2] The Agency’s determination of CNʼs and CP’s MRE must use the formula, the base year statistics, and the volume-related composite price index as defined in section 151 of the Canada Transportation Act (CTA). The Agency also requires CNʼs and CP’s specific tonnage and length of haul statistics for crop year 2014-2015.

[3] The Agency’s determination of each of CNʼs and CP’s western grain revenue complies with subsections 150(3), (4) and (5) of the CTA. It also reflects 114-R-2001">Decision No. 114-R-2001 and subsequent decisions concerning the interpretation of a number of matters that are to be considered when the Agency determines a prescribed railway company’s grain revenue for MRE purposes.

AGENCY DECISION

1.0 CN’S AND CP’S WESTERN GRAIN TRAFFIC STATISTICS FOR CROP YEAR 2014-2015

[4] A western grain movement for a given crop year is defined in section 147 of the CTA. Key terms are as follows:

“movement”, in respect of grain, means the carriage of grain by a prescribed railway company over a railway line from a point on any line west of Thunder Bay or Armstrong, Ontario, to

1. Thunder Bay or Armstrong, Ontario, or

2. Churchill, Manitoba, or a port in British Columbia for export,

but does not include the carriage of grain to a port in British Columbia for export to the United States for consumption in that country;

“grain” means

1. any grain or crop included in Schedule II that is grown in the Western Division, or any product of it included in Schedule II that is processed in the Western Division, or

2. any grain or crop included in Schedule II that is grown outside Canada and imported into Canada, or any product of any grain or crop included in Schedule II that is itself included in Schedule II and is processed outside Canada and imported into Canada;

“crop year” means the period beginning on August 1 in any year and ending on July 31 in the next year.

[5] The Agency’s determinations of CNʼs and CP’s tonnage and length of haul statistics for western grain movements for crop year 2014-2015 are shown in Table 1 below. These determinations were based on detailed traffic submissions by CN and CP, which were verified to ensure that the traffic qualified as western grain movements and that the related revenue, tonnage and mileage statistics were accurate. This verification led to the addition, rejection or modification of a number of records.

Table 1
Destination CN - Tonnes Moved Footnote 1 CP - Tonnes Moved TOTAL Tonnes Moved
Vancouver 10,070,269 13,361,736 23,432,005
Prince Rupert 6,151,957 0 6,151,957
Thunder Bay 2,347,685 5,985,794 8,333,479
Eastern Canada 1,725,639 1,611,206 3,336,845
Transitional TonnesFootnote 2 51,905   51,905
TOTAL 20,347,455 20,958,736 41,306,191
AVERAGE LENGTH OF HAUL (MILES) 1,011 885 947

[6] The above table indicates that 41.3 million tonnes of western grain were moved in the 2014-2015 crop year. The 41.3 million tonne figure is 7.4 percent higher than the western grain volume for the previous crop year.

[7] The 2014-2015 crop year average length of haul of 947 miles shown in the above table is two miles, or 0.2 percent, higher than for the previous crop year.

[8] Churchill is an eligible western grain destination. However, the Churchill-bound movements did not qualify to be included under the MRE Program because the CTA requires the carriage of western grain to be by a “prescribed railway company” and the only railway company “involved in the movement of western grain” (or) “that performs western grain movements” at Churchill, the Hudson Bay Railway Company, is not a prescribed railway company.

2.0 AGENCY PROCESS FOR ADMINISTERING THE MRE PROGRAM AND CN’S PROPOSED ADJUSTMENTS TO THE GRAIN TRAFFIC DATABASE (GTDB)

[9] In 2011, the Agency developed a new process for administering the MRE Program. The intent was to streamline the process for all parties involved by clearly establishing the Agency’s approach to administering, and improving the predictability of, the Program. Following consultations with the prescribed railway companies in 2010 and 2011, the Agency issued a series of letter decisions establishing the new approach to managing the MRE Program. One aspect of this  approach is that any  proposals for methodological changes and interpretations that have a material impact have fixed submission deadlines. If an industry participant  seeks the Agency’s consideration of a proposed change in a given crop year, it must file a written proposal on or before April 30 of that same crop year.

[10] In an Agency staff letter dated January 15, 2015, participants were given until April 30, 2015 to propose new issues for the Agency’s consideration for application in the 2014-2015 crop year. By April 30, 2015, no new requests for  proposed changes had been filed.

[11] However, as part of its final September 11 and October 9, 2015 GTDB submissions, CN asked the Agency to accept six adjustments that it made to its preliminary GTDB filed in June. After examining the details of CN’s request, on October 13, 2015, Agency staff advised CN that two of the six proposed adjustments ‒ namely, i) the addition of miles in the 2014-2015 GTDB to reflect the distances between Thornton Yard and various locations in the greater Vancouver area and from Neebing Yard to various points in Thunder Bay, and ii) the removal of traffic brought to SRY, Thornton Yard and Vancouver Intermodal Terminal ‒ might be material changes captured by the deadlines for administering the MRE Program and therefore might not be considered for the 2014-2015 crop year. Staff indicated that these matters would be brought to the Agency’s attention for a ruling.

[12] In a submission to the Secretary dated October 23, 2015, CN filed written submissions with the Agency indicating its position that the proposed adjustments were routine in nature and thus could be simply made as part of the Agency’s 2014-2015 MRE determination without the need for further assessment or consultation.

[13] On November 6, 2015, the Agency issued LET-R-69-2015">Decision No. LET-R-69-2015. The Agency found that four of the six proposed adjustments were routine in nature and accepted them. However, the Agency found that the two remaining proposed adjustments, as referenced above in paragraph 11, were not routine and needed to be addressed differently.

[14] On the issue of the addition of mileages at Vancouver and Thunder Bay, the Agency indicated that it had reason to believe that “this claimed understatement of mileage may not necessarily be due to an algorithm error, but that, in fact, the mileage may have been recorded in the same fashion since the establishment of the MRE program”. The Agency reasoned that if this were the case, then it would not be appropriate to compute the distance between a given origin and destination in a way that is different from the base year when there has been no change in operations. The Agency based its decision on the fact that its records showed that the shorter miles at port were reported in each of the crop years since the inception of the Program. The Agency also considered that the shorter mileage recorded to date in the MRE Program may be explained by the manner in which the movements were costed in the early nineties. It also reasoned that if mileages are allowed to be added in 2014-2015, the Agency may, in effect, be introducing costs that have already been accounted for in the base year.

[15] Based on this, the Agency deferred a ruling on the issue of additional miles and gave CN an opportunity to provide information that indicated “ that the mileages that they have requested for the 2014-2015 crop year have been determined in the same manner as the mileages for the base year, that is, CN is being asked to demonstrate the longer distances were also used in the base year”. The Agency indicated that if CN were to provide the requested information, it would accept the proposed adjustment, but stated that if CN was unable demonstrate that the base year statistics were derived using the same distances as those proposed by CN for 2014-2015, the Agency would consider the matter to be a material issue that would fall within the rules of the established process for managing the MRE. It stated that a final ruling on the issue would therefore be deferred until the 2015-2016 crop year and the proposed changes would not be considered for the purposes of the 2014-2015 MRE determination.

[16] On the issue regarding the eligibility of certain traffic to Thornton Yard, SRY and VIT, the Agency noted:

“that traffic that CN now seeks to have excluded has not been identified by CN as being destined to domestic markets or the United States. Once it reaches Thornton Yard, VIT or SRY, the traffic is furthered to a port facility located in the Greater Vancouver area, where it can be loaded onto a vessel for export. This traffic has always been included as eligible movements in previous years”.

[17] The Agency considered the matter material and found that its resolution would require the Agency to interpret the relevant provisions of the CTA having regard to the specific railway operations involved and the effect such a change would have on other industry stakeholders. Because the issue was brought forward by CN well past the deadline for consideration of a material matter, the Agency decided that CN’s proposed changes would not be made for the purposes of the 2014-2015 MRE determination and invited CN to resubmit the issue within the timelines for next year’s MRE determination.

[18] On November 20, 2015, CN filed additional submissions with respect to the two proposed adjustments.

[19] Regarding the issue of addition of mileages at port, CN took the position that the Agency has no discretion when applying the MRE formula prescribed by the CTA. It argued that a plain reading of the provisions allows the Agency to calculate factor C of the MRE formula as the distance between origin and final destination only (i.e. beyond Thornton Yard and Neebing Yard in this case). This, according to CN, is a simple mathematical exercise that does not entail any discretion. In CN’s view, the Agency’s role in establishing the MRE in a given crop year is simply to calculate Factors C & E and that it has no mandate or authorization to investigate whether there is an inconsistency when comparing an adjusted Factor C in the 2014-2015 crop year to base year statistics. CN also claimed that the Agency is bound to include all mileages calculated from origin to destination when computing Factor C, citing in support of its position the Federal Court of Appeal’s decision in Canadian Pacific Ltd. v. Canada (National Transportation Agency) (1992), 151 N. R. 16 respecting the meaning of “movement”.

[20] CN stated that it does not have the information requested by the Agency since it was Parliament that established the base year figures in the CTA. CN states that it has no knowledge of what went in to the development of the base year statistics and that as such the Agency is imposing an improper burden of proof on CN. Finally, CN indicated that the actual average annual distance applicable to CN under the MRE has always been less than the base year value.

[21] On the issue of eligibility of traffic brought to locations in the greater Vancouver area, CN reiterated its position that certain traffic brought to the SRY, a facility adjacent to Thornton Yard, to VIT and other specific locations “do not qualify under the tests in the definitions for “movement”, “port in British Columbia”, and “for export” found in section 147 of the CTA.”

[22] Finally, CN challenged the fairness of the Agency’s current process and requested modifications to the way proposed changes are addressed. It argued that the April 30th deadline is unreasonable because it is impossible for CN to know whether an issue will meet the Agency’s materiality threshold in time for CN to make submissions before the expiry of the deadline to make such submissions. According to CN, this results in CN being deprived of compensation for the costs it incurs and unduly exposes CN to penalties.

Analysis and Findings

Addition of Miles at Vancouver and Thunder Bay

[23] The Agency finds that CN’s proposal could constitute a material change to the manner in which the average length of haul figure for a given crop year is calculated, as it may be inconsistent with the manner in which the base year statistics were established in the CTA.

[24] The Agency notes that in determining a railway company’s average length of haul in a given crop year, subsection 151(1) of the CTA states that “C is the number of miles of the company’s average length of haul for the movement of grain in that crop year as determined by the Agency”. CN’s proposed change raises questions about how the distance measurements were made in the base year and how this should shape the methodology for the calculation of C. These matters relate to costing work performed more than 15 years ago, may have substantial impacts on the MRE and may also have implications for CP. As such, they are complex and material and merit further examination.

[25] During the time when the MRE Program and the associated base year figures included in the CTA were being contemplated, a number of studies were undertaken in conjunction with the Kroeger process. In June of 1999, the Agency was requested to provide an estimate of the costs for the movement of Western grain since the 1992 Costing Review using the latest available statistics. One input used by the Agency in its determination of estimates was the railway companies’ Rail Freight Traffic Databases which were routinely provided to the Agency. The Agency notes that the most recently available Rail Freight Traffic Databse, calendar year 1998, recorded mileages to Thornton Yard and to Neebing Yard only, additional miles to port were not included in the database at that time. This supports the Agency’s view that allowing an adjustment now could result in CN being compensated twice for the additional distance and thus further investigation is required.

[26] Given that CN has not provided the Agency with the required factual evidence as requested in LET-R-69-2015">Decision No. LET-R-69-2015 and that this matter is material and will require a more fulsome investigation, the Agency will not make the proposed adjustments with respect to the addition of mileages in the ports of Vancouver and Thunder Bay for the purposes of the 2014-2015 MRE determination.

[27] The Agency has requested that staff immediately begin an in-depth investigation into this matter with a view to establishing how movements in ports were costed when base year statistics were established for the MRE formula. The results of this investigation may inform the Agency’s consideration of CN’s request, if it is resubmitted before April 30, 2016.

The Removal of Traffic to Thornton Yard, SRY and VIT

[28] As indicated above, the Agency ruled in LET-R-69-2015">Decision No. LET-R-69-2015 that it would not accept the adjustments proposed by CN in respect of the removal of the identified traffic for the purposes of the 2014-2015 MRE determinations, given the materiality of the matter and the fact that it was only raised in August of 2015, some 3 months after the relevant deadline.

[29] Given the importance of the matter, Agency staff will undertake consultations on this matter early in 2016. Consultations will focus on whether traffic that is either delivered in hopper cars to trans-loading facilities for placement into containers and eventual furtherance to an export location or that arrives in a container that is eventually forwarded to an export location from an intermodal container facility is eligible traffic under the MRE Program. The Agency intends to consult with a wide range of industry stakeholders including, railway companies, grain shippers, producer groups and associations, provincial governments and municipal associations.

The Agency’s approach to administering the MRE Program

[30] The Agency notes that CN is challenging the fairness of the Agency’s handling of material issues and is asking that the approach be changed.

[31] The Agency is sensitive to the concerns expressed by CN that the Agency issue timely rulings on matters that affect the interests of CN. However, the Agency must ensure that before making a ruling on complex material issues, that it has all of the relevant facts and arguments that will allow it to make an informed decision.

[32] As a component of the 2011 process for administering the MRE Program, the Agency implemented deadlines with the goal of improving planning and limiting late-in-process “surprise issues”, unscheduled consultations and unanticipated changes in methodology. The Agency established this process precisely to avoid situations where decisions are made in haste. If insufficient time is available for the Agency to make an informed decision on a complex and involved matter, the potential for an improper determination that could have negative consequences for industry participants is increased.

[33] Under its approach the Agency considers a proposed change to determine, based on established criteria, whether or not it is routine, material and if it is sufficiently complex to warrant consultations. When an issue is brought forward past the deadline for submissions, the Agency may need to delay its consideration to the following crop year.

[34] The Agency notes that both CN and CP were consulted during the establishment of the improved process and both indicated at the time that a material change should not be dealt with in the crop year under review as that crop year will have already commenced as detailed in Decision No. LET-R-212-2010.

[35] The Agency finds that the current approach to managing the Program is the fairest way to address material issues given the wide range of interests at stake and the complexity of the matters that the Agency is faced with and finds that a change in its approach is not warranted at this point in time.

2.1 Issue reviewed in the 2014-2015 crop year

[36] On September 18, 2015, in response to an issue raised by CN in August of 2014 involving the treatment of revenues and workloads related to interswitching within the MRE Program, the Agency issued 305-R-2015">Decision No. 305-R-2015. In its Decision, the Agency revised the manner in which it accounted for interswitching workloads within the MRE Program and ordered that the new methodology apply equally for “exchange” switching workloads. The Agency ordered that the revised methodology adopted by the Agency was to apply for CN only for the 2014-2015 crop year and would not come into effect for CP until the 2015-2016 crop year.

3.0 CNʼS AND CPʼS WESTERN GRAIN MRE FOR CROP YEAR 2014-2015

[37] Agency staff has made adjustments to the MRE related figures submitted by the railway companies. The Agency has considered the staff adjustments and accepts them. These adjustments are discussed in section 4.3, along with Agency staff’s railway revenue adjustments.

3.1 CNʼs and CPʼs MRE calculations

[38] Subsection 151(1) of the CTA states that the following formula is to be used by the Agency in its determination of a prescribed railway company’s MRE:

[A/B + ((C-D) x $0.022)] x E x F

where

A is the company’s revenue for the movement of grain in the base year;

B is the number of tonnes of grain involved in the company’s movement of grain in the base year;

C is the number of miles of the company’s average length of haul for the movement of grain in that crop year as determined by the Agency;

D is the number of miles of the company’s average length of haul for the movement of grain in the base year;

E is the number of tonnes of grain involved in the company’s movement of grain in the crop year as determined by the Agency; and,

F is the volume-related composite price index as determined by the Agency.

[39] For CN, in respect of crop year 2014-2015, the values for A, B, C, D, E and F are as follows:

A = $348,000,000

B = 12,437,000

C = 1,011

D = 1,045

E = 20,347,455

F = 1.3322

[40] CN’s values for A, B and D are prescribed by subsection 151(2) of the CTA. As shown in section 1.0 of this Decision, the 2014-2015 crop year values for C and E were 1,011 miles and 20,347,455 tonnes, respectively. The value of 1.3322 for the volume-related composite price index for crop year 2014-2015 was determined in 374-R-2015">Decision No. 374-R-2015 which adjusted the value as previously set by the Agency in 304-R-2015">Decision No. 304-R-2015, LET-R-17-2015">Decision No. LET-R-17-2015 and Reasons and 150-R-2014">Decision No. 150-R-2014. In 374-R-2015">Decision No. 374-R-2015, the Agency, pursuant to section 151(6) of the CTA made the adjustment effective as of August 1, 2014 and hence the adjustment applied to the entire crop year.

[41] Applying these values to the MRE formula results in a CN revenue entitlement for crop year 2014-2015 of $738,202,311.

[42] For CP, in respect of crop year 2014-2015, the values for A, B, C, D, E and F are as follows:

A = $362,900,000

B = 13,894,000

C = 885

D = 897

E = 20,958,736

F = 1.3322

[43] CP’s values for A, B and D are prescribed by subsection 151(3) of the CTA. As shown in section 1.0 of this Decision, the 2014-2015 crop year values for C and E were 885 miles and 20,958,736 tonnes, respectively. The value of 1.3322 for the volume-related composite price index for crop year 2014-2015 was determined by the Agency in 374-R-2015">Decision No. 374-R-2015 which adjusted the value as previously set by the Agency in 304-R-2015">Decision No. 304-R-2015, LET-R-17-2015">Decision No. LET-R-17-2015 and Reasons and 150-R-2014">Decision No. 150-R-2014. In 374-R-2015">Decision No. 374-R-2015, the Agency, pursuant to section 151(6) of the CTA made the adjustment effective as of August 1, 2014 and hence the adjustment applied to the entire crop year.

[44] Applying these values to the MRE formula results in a CP revenue entitlement for crop year 2014-2015 of $721,908,606.

4.0 DETERMINATION OF CNʼS AND CPʼS WESTERN GRAIN REVENUE FOR CROP YEAR 2014-2015

4.1 Revenue and revenue reductions

[45] The determination of a prescribed railway company’s grain revenue requires many assessments by the Agency as to what is to be included as revenue or as an allowable reduction to revenue. While a partial list of such matters appears in subsections 150(3), (4) and (5) of the CTA, a more comprehensive list was established, following consultation with the grain industry, in 114-R-2001">Decision No. 114-R-2001.

[46] In summary, a prescribed railway company’s statutory western grain revenue stems mostly from billings generated by application of rates contained in published tariffs or in confidential contracts applicable to western grain movements. A railway company’s statutory grain revenue also includes:

  • a portion of amounts received for ensuring car supply through the car ordering process;
  • amounts received for providing premium service;
  • amounts received for performing interswitching or exchange switching; and,
  • amounts received for additional switching requested by the shipper.

[47] A railway company’s statutory grain revenue is to be net of any amounts paid or allowed for incentives, rebates or any other similar reductions, and does not include:

  • amounts that are earned which the Agency characterizes as a performance penalty or as being in respect of demurrage or for the storage of rail cars loaded with grain;
  • amounts earned for staging of rail cars in transit;
  • amounts for additional car switching, necessary due to shipper error or failure to meet obligations; nor,
  • compensation received for running rights.

[48] Allowable reductions to a railway company’s statutory grain revenue include:

  • the amortized amounts of contributions for the development of grain-related facilities to a grain handling undertaking that is not owned by the company (Industrial Development Fund contributions, or IDF);
  • amounts paid or allowed for interswitching or exchange switching; and,
  • amounts related to container pickup and delivery charges that are included in gross revenue amounts for intermodal movements.

[49] The following matters do not reduce a railway company’s statutory grain revenue:

  • amounts paid or allowed as dispatch;
  • amounts paid by railway companies resulting from the discontinuance of grain-dependent branch lines;
  • amounts paid by the railway companies as a performance penalty; and,
  • amounts paid for running rights.

4.2 Agency review of revenue and revenue deductions, and general findings

[50] Railway company records relating to western grain revenue were reviewed by Agency staff. Initial freight revenue data, including payments to other railway companies involved in the carriage of grain, were submitted by CN and CP on a per movement basis. General verification procedures were made on a record-by-record basis. In addition, more detailed analysis, based on sample testing, was performed to provide reasonable assurance that all western grain revenue has been captured and that revenue exclusions or reductions are appropriate and accurate.

4.3 Technical adjustments identified by Agency staff to submitted MRE and revenue figures

[51] Agency staff made technical adjustments to the revenue figures submitted by the railway companies. The Agency has considered the staff adjustments and accepts them. The revenue adjustments, and the MRE adjustments noted above, are discussed below.

CN

[52] For CN, the following adjustments made by Agency staff resulted in an increase to CN’s reported western grain revenue and/or its calculated MRE:

  • The addition of records in the GTDB for traffic to Thornton Yard, SRY and VIT increased CN’s reported revenues and its MRE.
    • Discrepancies were found in the evaluation of CN’s reported tonnage compared to the tonnage figures submitted to the Agency by the Canadian Grain Commission, requiring an increase in CN’s reported tonnage. This resulted in an increase in CN’s MRE.
  • 374-R-2015">Decision No. 374-R-2015 increased the value of the VRCPI for the purposes of determining the 2014-2015 MRE for CN. The use of the higher value increased CN’s MRE.
  • A minor adjustment was made to the transitional tonnage calculated as per Agency 305-R-2015">Decision No. 305-R-2015 which resulted in an increase in CN’s MRE.

[53] For CN, the following adjustments made by Agency staff resulted in a reduction to CN’s reported western grain revenue and/or its calculated MRE:

  • Records that contained erroneous information, such as movements reported with zero tonnage, duplicate records, low tonnage, or erroneous revenue per tonne, were removed from CN’s grain traffic database, which impacted both CN’s revenue and MRE.
  • A minor adjustment was made to CN’s revenues to reflect rebates associated with the fleet integration program.
  • The removal of additional mileages at the ports of Vancouver and Thunder Bay lowered CN’s MRE.

CP

[54] For CP, the following adjustments made by Agency staff resulted in an increase to CP’s reported western grain revenue and/or its calculated MRE:

  • 374-R-2015">Decision No. 374-R-2015 increased the value of the VRCPI for the purposes of determining the 2014-2015 MRE for CP. The use of the higher value increased CP’s MRE.

[55] For CP, the following adjustments made by Agency staff resulted in a reduction to CP’s reported western grain revenue and/or its calculated MRE:

  • Records that contained erroneous information, such as movements reported with zero tonnage, duplicate records, low tonnage, or erroneous revenue per tonne, were removed from CP’s grain traffic database, which impacted both CP’s revenue and MRE.
  • The amount of reported eligible revenue associated with additional switching was reduced to correct an overstatement in CP’s original submission.
  • CP’s submitted amount for pick-up and delivery charges associated with trucking (an eligible reduction to revenue) was adjusted upwards as a result of the upwards adjustment to the 2014-2015 VRCPI (374-R-2015">Decision No. 374-R-2015).
  • CP’s submitted amount for shortline costs was adjusted upwards to correct minor technical errors by CP.

[56] Agency staff will provide each railway company with details of the adjustments to its revenue and MRE in a separate confidential reconciliation letter.

4.4 CNʼs and CPʼs western grain revenue determination

[57] Taking all of the findings and adjustments into account, the Agency has determined CNʼs and CP’s western grain revenue for crop year 2014-2015 to be: CN = $745,068,906; CP = $724,045,774.

5.0 CNʼS AND CPʼS CALCULATED 2014-2015 MRE AND REVENUE

[58] The Agency has determined the western grain MRE and revenue for CN and CP for crop year 2014-2015 as set out below. Each of CN and CP is above its MRE.

Table 2
Crop year 2014-2015 MRE Revenue Amount above MRE Amount below MRE
CN $738,202,311 $745,068,906 $6,866,595  
CP $721,908,606 $724,045,774 $2,137,168  

[59] Subsection 150(2) of the CTA provides that if a prescribed railway company’s revenues, as determined by the Agency, for the movement of grain in a given crop year exceed the company’s maximum revenue entitlement for that year, the company shall pay out the excess amount, and any penalty that may be specified in the regulations.

[60] The Regulations provide, in part:

2. The penalty that a prescribed railway company shall pay out pursuant to subsection 150(2) of the Act, if the company’s revenues for the movement of grain in a crop year exceed the company’s maximum revenue entitlement for that year, as determined under subsection 151(1) of the Act, is

(a) five per cent of the excess amount, if that excess amount is one per cent or less of the company’s maximum revenue entitlement; or

(b) 15 per cent of the excess amount, if that excess amount is more than one per cent of the company’s maximum revenue entitlement.

[...]

4. (1) The excess amount and the penalty that a prescribed railway company shall pay out pursuant to subsection 150(2) of the Act must be paid out to the Western Grains Research Foundation in the form of a certified cheque, money order or bank draft.

[61] Given that CN’s statutory grain revenue exceeds its MRE for crop year 2014-2015 by an amount of $6,866,595, the Agency, pursuant to the Regulations and subsection 150(2) of the CTA, orders CN to pay to the Western Grains Research Foundation, within 30 days from the date of this Decision, the amount of $7,209,925, which represents the sum of the excess amount of $6,866,595 and the prescribed penalty of $343,330 as provided for under paragraph 2(a) of the Regulations.

[62] Upon payment of the excess amount and the applicable penalty, CN is to notify the Agency, in writing, of the amount paid out and the date on which it was paid.

[63] Given that CP’s statutory grain revenue exceeds its MRE for crop year 2014-2015 by an amount of $2,137,168, the Agency, pursuant to the Regulations and subsection 150(2) of the CTA, orders CP to pay to the Western Grains Research Foundation, within 30 days from the date of this Decision, the amount of $2,244,026, which represents the sum of the excess amount of $2,137,168 and the prescribed penalty of $106,858 as provided for under paragraph 2(a) of the Regulations.

[64] Upon payment of the excess amount and the applicable penalty, CP is to notify the Agency, in writing, of the amount paid out and the date on which it was paid.

Member(s)

Scott Streiner
Sam Barone
P. Paul Fitzgerald
Date modified: