Determination No. R-2018-164

July 23, 2018

DETERMINATION by the Canadian Transportation Agency (Agency) of the effective date for certain amendments to the Canada Transportation Act, S.C., 1996, c. 10, as amended (CTA), affecting the calculation of the maximum revenue entitlements for the Canadian National Railway Company (CN) and the Canadian Pacific Railway Company (CP).

Case number: 
18-00107

SUMMARY

[1] On May 23, 2018, Bill C-49, the Transportation Modernization Act, received Royal Assent. The Bill included amendments to the CTA provisions prescribing the manner in which the Agency must determine CN’s and CP’s revenues as part of the maximum revenue entitlement (MRE) program.

[2] For the reasons set out below, the Agency finds that these changes should be applied in respect of CN’s and CP’s revenues earned from the date of Royal Assent.

BACKGROUND

[3] The MRE is a statutory limit on the revenue that can be earned by CN and CP for the movement of western grain in a crop year. This limit is set out in subsection 150(1) of the CTA.

[4] The Agency is required to determine CN’s and CP’s MRE and revenues by December 31 following the end of the crop year, which runs from August 1 to July 31.

[5] If CN’s or CP’s revenues exceed their MRE, they must pay out the excess amount plus a penalty to the Western Grains Research Foundation, a farmer-financed and -directed organization set up to fund research that benefits Prairie farmers.

[6] On May 23, 2018, Bill C-49, which includes amendments to the CTA related to revenues to be included in the determination of CN’s and CP’s revenues for the movement of grain, received Royal Assent. These amendments require that the Agency include revenues earned for traffic destined to be delivered to a port in Vancouver and for the movement of soybean traffic, and to exclude revenues from regulated interswitching activities and containerized grain movements. Bill C-49 was silent on the effective date of these changes.

SHOW CAUSE DECISION

[7] In Decision No. LET-R-46-2018 dated July 3, 2018, (Show Cause Decision), the Agency made preliminary findings on when these MRE-related requirements would come into effect and allowed CN and CP to show cause as to why a date other than May 23, 2018 should be used as the start date for application of the new MRE-related requirements. Other industry participants were notified of the Show Cause Decision and were invited to provide comments as well.

[8] CN and CP each submitted a response to the Show Cause Decision on July 10, 2018. No other industry participants provided submissions.

RESPONSES TO THE SHOW CAUSE DECISION

[9] CN agrees with the Agency’s preliminary findings that May 23, 2018 is the proper date for application of the new MRE-related requirements. CN states that this view reflects the intent of Parliament. CN references section 5 of the Interpretation Act, (R.S.C., 1985, c. I-21) for support for its conclusion that Parliament intended that the date of Royal Assent be the date that these provisions apply, as no transitional provisions to state otherwise were included in the Act.

[10] CP agrees with the Agency’s reasons for its preliminary finding and states that, from a legal perspective, a plain reading of Bill C-49 would tend to support the view that the implementation of the amendments should be from the date of Royal Assent forward.

[11] CP then argues that, from a policy perspective, delaying application of the MRE-related requirements to the beginning of the 2018-2019 crop year would be preferable. CP asserts that such an interpretation would be consistent with “the historical industry practice and the general legislative scheme in all matters relating to the maximum revenue entitlement (MRE) program”. It argues that to introduce any material change to the MRE rules part way through a crop year would negatively affect its ability to manage its entitlement.

ANALYSIS AND DETERMINATIONS

[12] The Agency acknowledges CP’s position that any change to the rules that govern the establishment of the railway company’s revenues and revenue entitlements within the purview of the MRE program introduced part way through a crop year may present a challenge in terms of the management of the railway company’s entitlement. However, CP does not offer a legal basis upon which the Agency could delay application of the new MRE requirements to the beginning of the next crop year.

[13] If Parliament had intended for the provisions to take effect in the crop year following the year in which the Bill received Royal Assent, it could have included appropriate transitional provisions in Bill C-49, as it did with respect to changes to the calculation of the volume-related composite price index. In the absence of such provisions, there is no statutory basis for postponing the application of these new requirements.

[14] For these reasons, the Agency determines that the amendments to the CTA provisions prescribing the manner in which the Agency must determine CN’s and CP’s revenues as part of the MRE program shall be applied from May 23, 2018, the date of Royal Assent.

Member(s)

Scott Streiner
Elizabeth C. Barker
J. Mark MacKeigan
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