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Interlocutory Decisions : 2002

2002-01-09

LET-R-8-2002

File No. T7475/01-03

This is in reference to the motion dated December 6, 2001, filed by the Canadian National Railway Company (CN) requesting that the Canadian Transportation Agency (Agency) summarily dismiss the above-noted application for lack of authority under section 138 of the Canada Transportation Act (CTA).

BACKGROUND

On October 25, 2001, Ferroequus Railway Company Limited (FE) made an application to the Agency requesting an order granting it the right to run and operate its trains on and over specified CN lines from Lloydminster, Saskatchewan and Camrose, Alberta to the port of Prince Rupert, British Columbia. On November 6, 2001, CN requested that the Agency either dismiss or stay FE's application pending the receipt of additional information.

By Decision No. LET-R-443-2001 dated November 9, 2001, the Agency directed interrogatories to FE and set out procedural directions for the filing of pleadings. Further to FE filing its answer to the Agency's interrogatories on November 24, 2001, CN filed the above-noted motion for dismissal of the application.

POSITIONS OF THE PARTIES

In support of its motion, CN argues that FE's current application for running rights is similar to an earlier application filed by FE on February 20, 2001 which was dismissed by the Agency pursuant to Decision No. 213-R-2001 dated May 3, 2001. CN states that the Agency concluded, at that time, that section 138 of the CTA simply allows for access and a transit right if it is in the public interest to do so, and that the current legislation does not empower the Agency to grant running rights for the express purpose of soliciting traffic. CN submits that FE's current application which requests the right to run and operate over specified CN lines, is traffic solicitation on CN's rail network at Camrose, Alberta and Lloydminster, Saskatchewan.

CN states that there is no distinction between interchange and "station", as both are treated the same under the CTA level of service provisions and that any traffic moving onto CN's lines from either a siding or from an interchange would be traffic which CN has an obligation to carry. As such, CN argues that this traffic is as much CN's as that of traffic originating at a customer's facility.

In its answer, FE submits that the Agency determined in Decision No. 213-R-2001 that section 138 of the CTA is a competitive access provision which authorizes the Agency to grant transit running rights for the purpose of offering shippers the ability to use two railway companies rather than one.

FE argues that as the traffic to be moved over the lines of CN does not originate on CN's lines and absent any agreement between the Canadian Wheat Board (CWB) and CN for the movement of the traffic, CN cannot claim ownership of the traffic. FE adds that CN's argument that the CWB is unable to choose the routing or which carriers will carry its grain traffic has been previously dealt with by the Agency and the courts.

In its reply dated December 19, 2001, CN argues that FE's intention to acquire running rights on a single railway does not qualify as a bridge operation as contemplated by the Agency in its May 3, 2001 decision. CN reiterates that as FE will take delivery of CWB traffic on its trackage located near an interchange with CP, this traffic originates on CN lines and therefore constitutes traffic solicitation.

In a submission dated December 27, 2001, CN purported to file additional argument to the effect that FE's application for running rights is incomplete as it fails to include the Canadian Pacific Railway Company (CP) as a necessary party and adds that as the Prince Rupert Grain Company, as the destination terminal, is a CN customer, FE would be soliciting CN traffic under its proposal.

ANALYSIS AND FINDINGS

CN argued that it effectively has a property right in a shipper's traffic when that shipper can access CN lines at an interchange. This right, according to CN, arises from the level of service obligations under the CTA.

It is clear that paragraph 113(1)(a) of the CTA creates as a level of service provision, among other things, the obligation for CN to provide adequate and suitable accommodation at points of origin and points of junction with another carrier to receive traffic offered for carriage on the railway. However, this obligation does not thereby also convey to CN an absolute right to carry all such traffic - to the exclusion of competing carriers.

Any right which CN may have to carry this traffic, to the extent that it does exist, is modified by the provisions in the CTA that enhance competition. Thus, for example, pursuant to the interswitching and competitive line rate provisions under the statute, one carrier may compete for and carry traffic that originates on or is destined for another carrier's infrastructure.

As such, it cannot be said that CN has any absolute right to a shipper's traffic. The fact that CN may have benefited from the CWB traffic originating on CP lines routed to Prince Rupert in the past does not make this traffic CN's forever. The CWB has alternatives, which include interswitching and competitive line rates, noted above, so that its choice of routing and carrier is based upon competition, not captivity.

CN has basically argued that even when there is a potential for CN to carry a shipper's traffic, this is sufficient to make the traffic CN's. The Agency does not find this to be the case. If it were so, there may never be a case for the application of statutory running rights in Canada.

A statutory running right, by definition, requires the existence of an interchange where traffic is transferred from one carrier to another. If all traffic arriving at an interchange for transit or bridge purposes were required to be transferred to the railway company owning the infrastructure beyond the interchange (here CN), it is difficult to imagine any case of a running rights application ever succeeding as, according to CN, the transit carrier would always be guilty of soliciting CN's traffic at that interchange point. The Agency finds that CN's proposition is antithetical to the principles of shipper choice and competition which are the cornerstones of Part III of the CTA.

With respect to CN's argument regarding CP's status as a party, the Agency initiated pleadings on this matter in Decision No. LET-R-1-2002 dated January 4, 2002.

CONCLUSION

For the reasons set out above the Agency dismisses CN's motion to summarily dismiss FE's application.