Letter Decision No. LET-R-278-1999

November 4, 1999

Application by the Canadian National Railway Company for a determination of the Net Salvage Value - Cudworth Subdivision and the application by seven municipal governments in the province of Saskatchewan for a preliminary ruling that the value of assets acquired under various Rehabilitation Agreements be excluded from net salvage value

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The Canadian Transportation Agency (Agency) has examined the letters dated October 29, 1999 filed by the Canadian Pacific Railway Company (CP) and the Canadian National Railway Company (CN) requesting, in part, that the Agency exclude certain witness and intervener

statements filed in the above-noted proceedings. CN and CP state that these statements ought to be excluded on the grounds that they were filed late, do not comply with statement requirements under the hearing Terms of Reference, or they present evidence and argument that are irrelevant to these proceedings. The Agency has also examined the answer of the Applicants dated November 2, 1999.

Late Submissions

CP states that the deadline for the filing of intervener submissions, as established in the Notice of Public Hearing, was October 15, 1999, and that the majority of submissions filed with the Agency were filed after this date. CP indicates that many of these submissions were only received by CP on October 20 or 21, 1999. Given this lateness, CP states that these submissions should be returned in order to preserve fairness in the proceeding.

The Agency has examined all interventions filed and finds that all but three were filed with the Agency on time. The fact that copies were provided to CP several days after the filing deadline does not merit that these statements be returned.

The three submissions which were filed beyond the deadline were those of Mr. Brian Domotor, filed on October 18, 1999, the Canadian Grain Commission, filed on October 20, 1999, and the Village of Wood Mountain, filed on October 25, 1999.

With the exception of the Canadian Grain Commission's submission which is dealt with hereafter, the other two submissions are accepted by the Agency and shall form part of the record of the Agency. The filing of these submissions shall not be defeated by a relatively minor technical irregularity. Any submissions that are to be filed hereafter must provide reasons as to why they are late as well as why the Agency should accept them.

Failure to Comply with Submission Requirements

CP also states that many of the submissions filed with the Agency are incomplete as they fail to comply with the filing requirements established in the Notice of Public Hearing. CP states that the submissions are incomplete as they: have not provided any detailed argument in support of their position; have not provided witness qualifications or witness statements; or, have failed to indicate whether the intervener intends to make an oral presentation to the Agency.

The Agency has examined this request and all submissions filed and finds that all intervener submissions have substantially complied with the filing requirements set out in the Notice of Public Hearing. None of these interveners are represented by counsel and the Agency finds that it would be unduly harsh to reject these submissions on the grounds of minor non-compliance with filing requirements. Each of the submissions filed with the Agency adequately presents the position of the intervener on the matters before the Agency thereby providing the Agency, as well as CP, with sufficient notice of the nature of their intended participation. CP's request in this regard is, therefore, dismissed.

Applicants' Witness Statement for Dr. Gould

CP argues that the witness statement for Dr. Gould filed by the Applicants is deficient as it only lists the topics he intends to address. CP argues that Dr. Gould's statement should indicate his opinions and conclusions, including impacts or effects, and should present the evidence he intends to rely on in support of his position.

CN requests that the Agency not permit Dr. Gould to be sworn as a witness if the Applicants have not complied with the usual, customary and mandatory practice of serving a complete copy of the expert's report at least ten days prior to the start of the hearing.

The Applicants responded by stating that they believed Dr. Gould's statement complied with the directions of the Agency, and that they were not familiar with the filing requirements identified by CN. The Applicants also indicated that they would provide the written evidence requested, if CN and CP did the same.

The Agency finds that the Notice of Public Hearing did not specifically address the filing requirements for the statements of expert witnesses. As expert witnesses are allowed to provide opinion evidence, it is appropriate to expect that they file, as part of their witness statements, the evidence which they will be relying on, together with their analysis in support of any conclusions or opinions they present. This is the traditional manner by which the Agency accepts expert evidence at public hearings.

The Agency accordingly directs the Applicants to file an expert report that meets this standard. This report should be filed with the Agency, with copies provided to CN and CP, by November 8, 1999.

In the event that CN or CP wish to present their own expert by way of rebuttal, their witness statements shall be filed with the Agency and copied to the Applicants by no later than November 12, 1999. In this respect, the Agency acknowledges that the witnesses identified in the CN and CP witness statements are railway company officials who will be presenting evidence at the hearing on behalf of their employer. They will testify regarding their direct experience with how the railway company dealt with the rehabilitation assets and why. As such, they are not 'experts', like Dr. Gould, who intends to provide opinion evidence on how such funded assets ought to be treated based upon economic and regulatory principles in other jurisdictions or industries.

Relevance of Evidence Filed by the Applicants

CP states that the witness statements of the Applicants, which include the proposed filing of a railway operation "feasibility study", address matters that are not related to the issue to be decided by the Agency in these proceedings.

CP states that these witness statements address several irrelevant matters such as: the value of rail operations on the Cudworth Subdivision to area communities; the provincial and community support for, as well as the demand for, continued rail service; the effect on the economic viability of railway operations on the line if the value of the rehabilitation assets are included or excluded in the assets transferred; and the evaluation of minimum revenue requirements for railway operations on this railway line.

All of these matters, according to CP, are outside the Terms of Reference identified in the Agency's Notice of Public Hearing.

CN also argues that much of this evidence, notably that relating to the "feasibility study", is outside the scope of the hearing Terms of Reference. CN states, in part, that the Agency's examination of CN's actual interest in one of its lines of railway is not, in any way, related to, determined or affected by the future potential interest of a short line operator. CN also states that the Agency would be committing a "reviewable error of law" if it were to examine issues that are within provincial jurisdiction.

The Applicants argue that their witness statements comply with the Terms of Reference as the Agency's mandate in these proceedings must include an examination of the purpose of the Rehabilitation Agreements as well as the intent of Division V, Part III of the Canada Transportation Act (CTA). This, according to the Applicants, includes a consideration of the impacts on continued railway operations should assets which were funded by the federal government be included in the net salvage value which the Applicants are obligated to pay in order to acquire the railway line.

The Agency has examined the Terms of Reference identified in the Notice of Public Hearing. These Terms are not ambiguous based upon an examination of the context within which they arise.

The task for the Agency in these proceedings is to examine whether a particular type of asset used in railway operations, in this case assets funded under the Rehabilitation Agreements, represent part of the railway company's interest in the railway line that is to be conveyed.

This task specifically arises under subsection 145(1) of the CTA which clearly defines what the railway company, here CN as a federally-regulated railway company, must offer to sell. That is, subsection 145(1), provides, in part that; "The railway company shall offer to transfer all of its interest in the railway line to the governments mentioned in this section for not more than its net salvage value to be used for any purpose...".

The Agency finds that this section requires an examination of the assets of the vendor railway company, which under the CTA must be a federal entity. There is no jurisdiction here for the Agency to examine the assets of other provincial railway companies.

The Agency also finds that it is beyond the scope of this section to assess the feasibility of provincial short line operations. This mandate has not been given to the Agency by Parliament.

The Agency hereby directs that any evidence to be presented by the Applicants' witnesses at the upcoming hearing shall be confined to matters relating to the net salvage value of assets funded under the subject Rehabilitation Agreements and whether or not these assets represent an interest to be transferred by the vending railway company pursuant to section 145 of the CTA.

Accordingly, the portions of the witness statements of Messrs. Fahlman and Zsombor that address the viability of short line operations shall not form part of the Agency's record in these proceedings. Further, the Agency will not permit the filing of a short line feasibility study and supporting confidential data.

Request for In Camera Session

The Applicants have requested that the Agency convene an in camera session in order to accept and examine the above-noted confidential information filed in support of the Applicants' "feasibility study".

In light of the above finding, the request for the in camera session is dismissed.

Intervener Submission

The Agency also finds that the submission filed by the Canadian Grain Commission shall be excluded from these proceedings and returned. This submission deals with the right of producers to order and load directly into producer cars and is filed in support of the maintenance of this right. As set out above, this issue is outside of the Agency's Terms of Reference.

Witness and Intervener Statements

The Agency hereby directs that all witness and intervener statements at the hearing should be confined to addressing the net salvage value of assets funded under the Rehabilitation Agreements and whether or not these assets represent an interest of the vending federal railway company, whose interest is to be transferred to governments pursuant to section 145 of the CTA.

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