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Interlocutory Decisions : 2001

2001-03-16

LET-R-127-2001

File No. T 7475/01-1

This is in reference to the above-noted application filed by the Ferroequus Railway Company Limited (FE) on February 20, 2001. In its application, FE requests three Canadian Transportation Agency (Agency) orders. Firstly, FE asks the Agency for what may be termed a "running rights" order. That is, FE requests an Agency order granting FE the right to run and operate on and over specified lines of the Canadian National Railway Company (CN); to pick up and deliver traffic on and over the specified lines; and to use, possess or occupy lands, terminals, sidings and other railway infrastructure along the specified lines as required for operation. The Agency shall immediately proceed with this particular application as one which is filed pursuant to subsections 138(1) and (2) of the Canada Transportation Act (CTA).

FE requests an order from the Agency to fix the compensation for the requested running rights. As this request is being filed with the Agency contemporaneously with FE's application, the Agency understands that FE would like the Agency to hear and determine this request at the same time as that of the running rights.

The Agency will not hear and determine the compensation request at this time. There are several reasons. First and foremost, the need to fix running rights compensation will arise if and when a running rights order is issued by the Agency. It would be premature to fully hear the compensation issue at this time as in the end, compensation may not need to be determined; either because, if the running rights application is granted, the parties themselves may be able to reach a negotiated agreement on the level of compensation; or, because the Agency denies the running rights application.

There are also practical reasons that require dealing with the running rights and compensation requests separately and sequentially, if necessary. That is, it would be virtually impossible to set any meaningful compensation in advance of knowing exactly what "running rights" operations are involved. For example, compensation cannot be set in advance without first knowing where and what railway operations will be involved and these matters will only be decided following the Agency's "public interest" determination on the merits of the running rights request.

For the above reasons, FE's request for a compensation order is denied on the grounds that it is premature. FE will have the right to file such an application in the future, if necessary.

Secondly, FE has requested that the Agency, by order, vary FE's Certificate of Fitness in accordance with the desired running rights. For the same reasons set out above, this request is denied at this time. That is, it too is premature. It would not be appropriate for the Agency to speculate on insurance matters in advance of knowing, for example, exactly where FE will operate, how it will operate, and what commodities it may carry. All of these matters will only be determined following the Agency's decision on whether the running rights request should be granted.

In addition, any award of running rights will be subject to compensation costs which FE will have to pay. The amount of any such compensation may have a bearing upon matters such as FE's self-insured retention levels which are a critical component in the Agency's consideration of whether there is adequate third party liability insurance for a proposed railway operation.

Consistent with the above finding relating to a possible future compensation application, FE will also have the right to file an application with the Agency for a varied certificate of fitness if and when this becomes necessary.

The Agency acknowledges that one of the fundamental issues raised in this application relates to the scope of section 138 of the CTA . In this respect, the Agency anticipates arguments to the effect that this provision is narrow in scope and can only support requests for what are essentially limited "transit" rights. This interpretation suggests that this section does not allow for a broad running rights request with traffic solicitation rights, such as the instant application. On the other hand, others may argue that the scope of this section is broad and can indeed support such an application.

The Agency's determination of this issue will have potentially far-reaching impacts that go beyond this particular application. For this reason, prior to making its decision, the Agency intends to solicit comments from industry participants. Accordingly, notice of this question is being given by sending a copy of this Decision to those who are identified in the attached mailing list.

Persons, including FE and CN, who wish to comment on the scope of section 138 of the CTA and particularly, whether the FE application legally fits within its ambit, may file a written submission with the Agency with a copy to FE and CN by no later than April 2, 2001. CN as respondent herein shall have an opportunity to file an answer by no later than April 5, 2001, and FE as applicant shall have until April 9, 2001 to file a reply.

The Agency has also received a second running rights application from the Hudson Bay Railway Company. This application raises the same issue of scope and it shall be dealt with separately, in a similar manner.

The Agency acknowledges that one possible outcome of a preliminary ruling on the scope of section 138 of the CTA, is a decision that precludes further proceedings on the merits of this application. Nevertheless, the Agency cannot prejudge this issue and hereby directs an information demand to FE which is set out fully in Appendix 1.

This demand relates to various substantive matters raised in FE's application as well as the legal standing of FE as a "railway company" to make an application under section 138 of the CTA.

Pursuant to subsection 18(1) of the National Transportation Agency General Rules (General Rules) the Agency hereby directs FE to respond to the questions hereto attached, providing where appropriate, written evidence in support of its responses on or before March 26, 2001. Further, and in accordance with subsection 18(2)of the General Rules, the Agency directs FE, at the same time, to provide a copy of its responses to CN. CN shall then have an opportunity to use this information as part of any answer which it may file with the Agency pursuant to section 46 of the General Rules.

CN's deadline for filing its answer to FE's original application has been identified as March 26, 2001. In light of this Agency Decision to deal only with FE's request for a running rights order at this time and, given the additional disclosure which is to be provided to CN by FE as a result of the Agency questions, CN is hereby given until April 2, 2001 to file its answer.

In light of the new deadline for the filing of CN's answer, FE is now to provide its reply to CN's answer on or before April 9, 2001.

Intervener submissions and disclosure

It is anticipated that third parties may also seek intervener status in these proceedings for the purpose of filing a submission on the merits of FE's application. As with the above-noted scope issue, the Agency shall provide notice of this merits issue to industry participants. Copies of the full public record in these proceedings shall be made available upon request for the purpose of assisting in the preparation of intervener submissions.

Intervener submissions on the merits of this application, (as apart from the scope issue), shall be filed with the Agency and served on FE and CN by no later than April 17, 2001. FE and CN shall then have until April 24, 2001 to file their responses to any submissions so filed that are adverse in interest.

Pursuant to section 11 of the General Rules, any document filed with the Agency in a proceeding is public unless the person filing the document makes a claim for confidentiality. Where any participant, asserts a claim of confidentiality in respect of any document to be filed with the Agency, they are hereby directed to file an abridged public version of that document. The abridgment shall, at a minimum, disclose all non-confidential information and identify the general nature of the information which is claimed as being confidential.

Any assertion of confidentiality shall specify clearly why any particular information is claimed as confidential and shall identify any specific direct harm which would be likely to result from public disclosure. Further, claimants are also directed to indicate whether, or to what extent, any specific direct harm so shown is or is not sufficient to outweigh the public interest in having the document disclosed publicly.

In the event that there is a request for public disclosure of information claimed as being confidential, those requesting disclosure shall specify the reasons for their request, including the relevance of the document or information to the proceeding and the public interest in its disclosure in the context of the Agency's regulatory responsibilities. Any material in support of the reasons for public disclosure must also be filed. Participants asserting a claim of confidentiality shall then have an opportunity to file a reply following which the Agency shall rule on the request.

As set out more fully above:

1. Interveners as well as FE and CN, shall have until April 2 , 2001, to file a submission on the scope issue. CN shall have until April 5 , 2001 to file an answer to any submissions so filed that are adverse in interest and FE shall have until April 9, 2001 to file a reply.
2. FE shall have until March 26, 2001 to file its responses to the Agency's questions, providing copies of its answers to CN at the time of filing.
3. CN shall have until April 2, 2001 to file its answer to FE's application for running rights. FE shall, in turn, have until April 9, 2001 to file its reply to CN's answer.
4. Interveners shall have until April 17, 2001 to file submissions on the merits of FE's application. FE and CN shall then have until April 24, 2001 to file their responses to submissions so filed that are adverse in interest.

Adherence to these filing deadlines is critical and the granting of any extensions shall be on an exceptional basis only.

All participants are encouraged to file, with their paper documents, an electronic copy of their material on a 3.5 inch IBM compatible floppy diskette (in, or convertible by and into, WordPerfect 9.0 format).

The Agency anticipates ruling on the scope and standing issue by mid-April, 2001 and hereby advises, depending upon the outcome of any scope decision, that it may convene a public hearing on the merits of FE's application. It is to be expected that at such a hearing FE, CN and other participants may present their submissions orally, along with supporting evidence and oral argument. A notice of time and place for any hearing as well as procedural directions and hearing Terms of Reference will issue in the event that a hearing is called.

FE states that it is a railway company and has filed in support Agency Decision No. 388-R-1999 dated July 5, 1999 and Certificate of Fitness No. 99001 also dated July, 5, 1999. This Decision and Certificate indicate that the Certificate is granted for specific purposes, which are set out in the Decision and Certificate. FE is requested to indicate whether the then proposed railway operation has been completed or is still ongoing. Indicate how this certificate is sufficient to found an application for running rights by FE as a "railway company" within the meaning of section 138 of the CTA.

FE states that the public interest is well served by a less costly service. Provide the definition of public interest used to support the application for running rights and provide substantiating information on how lower costs of a regional operator will enable more competitive rates for shippers, and how this factor will impact on the public interest.

The Agency requests that FE provide the Agency with a copy of its pro-forma financial statement as well as its business plan which shall include the following information:

(i) the total number of kilometres FE intends to operate;

(ii) the market and customers FE intends to serve along the proposed routes;

(iii) for the markets indicated, an estimate of the annual volumes, by commodity, for the first three years of operation;

(iv) whether any of these commodities are classified as dangerous goods;

(v) whether FE proposes to operate a passenger-train service;

(vi) for each subdivision group, indicate the location of train crew assignment, the routing of traffic, the proposed frequency of the traffic and timing of the service, size of train consists to be operated, expected average train length, fuelling requirements, switching requirements by CN yard, a description of the work to be carried out including expected turn around times, the type of service to be provided and the annual estimated volumes for the first three years;

(vii) with respect to any proposed grain operations, describe the role FE will play in securing car supply within the evolving car allocation regime which involves grain shippers, the Canadian Wheat Board (CWB), CN and the Canadian Pacific Railway Company; and

(xiii) whether FE has entered into discussions with the federal and provincial governments and the CWB concerning the apportionment of government-owned hopper cars for grain operations and if so, the nature and outcome of such discussions.

(i) a description of the rail equipment currently owned by FE including locomotives and other rolling stock including type, tare weight, capacity, length and age;

(ii) a description of the rail equipment currently leased by FE, including locomotives and other rolling stock. For locomotives, include horsepower, age and weight. For rolling stock, include type, tare weight, capacity, length and age;

(iii) details of any plans by FE to purchase or lease rail equipment including for each equipment type, the intended transaction (purchase or lease), number to be purchased or leased, and the horsepower (locomotives) or tare weight and carrying capacity (freight cars) of the equipment;

(iv) a description of how maintenance of railway equipment will be undertaken including details of the qualifications of maintenance personnel;

(v) a description of rail equipment maintenance facilities owned by FE including, for each such facility, details on the location, size per square metre, and maintenance equipment contained therein;

(vi) the number of employees FE intends to employ to carry out the proposed operation including a breakdown of the number employed in management, customer service, train crew and equipment maintenance and other staff;

(vii) a description of crew change points;

(viii) a description of arrangements FE has made for clearing derailed cars and setting off bad orders;

(ix) a description of the plans for interaction between FE trains and CN's trains including a description of how FE trains will be integrated into CN's schedules and how train priority issues will be handled; and

(x) whether FE anticipates interchanging traffic with other railways and, if so, include a list of any interchange arrangements.

Question 4.

In its application, FE states that the public interest is well served by less costly service and that the lower costs of a regional operator will enable more competitive rates for the shippers. Lower rates, in the opinion of FE, will be possible as its cost for the carriage of grain will be lower than CN's. Provide FE's proposed freight rates with supporting costing details by major cost category (i.e. labour, capital and other operating costs) which will substantiate FE's view that it is a lower cost operator compared to CN.

In its application, FE states that a lower port cost is possible once the Port of Prince Rupert attains its full potential. Demonstrate how FE's proposed service will help the Port of Prince Rupert attain its full potential thereby lowering port costs. In addition, indicate whether FE has commitments with grain shippers or other shippers regarding the further use of the Port of Prince Rupert. If so, provide any documents in this respect.

If the Port of Prince Rupert realizes its full potential, how will this impact the Port of Vancouver?

Question 7.

How will FE's proposed operation impact the communities located along the lines specified in its application?