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News Release

Canadian Transportation Agency Concludes that CN Failed to Fulfill its Service Obligations with Respect to Naber Seed & Grain

OTTAWA - June 11, 2002 - The Canadian Transportation Agency today issued its decision on two complaints filed by Naber Seed & Grain, a special crop shipper, concluding its review of allegations that CN failed to fulfill its common carrier obligations during crop year 2000-2001. This decision follows a hearing that was held by the Agency from January 28 to February 6, 2002, in Saskatoon, Saskatchewan.

The Agency determined that CN failed to provide adequate and suitable service by rationing the allocation of hopper cars for the carriage of special crop products, such as peas, chick peas and lentils, from Naber's facilities at Melfort and Star City, Saskatchewan and Kathryn, Alberta to the Ports of Vancouver and Prince Rupert, British Columbia during Grain Shipping Weeks 18 to 38 of crop year 2000-2001. The Agency concluded that CN's grain handling and transportation system is not geared to meet the needs of the special crop shippers but, rather, is adapted to optimize CN's asset utilization and to meet the needs of major grain shippers.

The Agency, in its Decision No. 323-R-2002, states: "... it remains that the delivery of cars to (Naber) during the complaint period was restricted and that the car shortage experienced by (Naber) was severe at times with consequent adverse effects on its operations. (...) In this regard, the evidence produced during the proceedings clearly demonstrates that this practice does not suit the specific transportation requirements of special crop shippers and, in particular, those of (Naber)."

Having determined that CN failed to fulfill its common carrier obligations with respect to Naber, the Agency had to determine a remedy after considering the nature of the breach: "...the Agency notes that (Naber) has filed three complaints with (it) and the level of service offered during the period of this third complaint is still inadequate and does not meet the transportation requirements of (Naber). It is also significant to the Agency that (Naber) has no practical transportation alternative and is captive to the rail service provided by CN at its three processing plants. In that context, the Agency is cognizant of the need to find an effective remedy that would alleviate the likelihood of a further breach in CN's service obligations."

A part of the remedies sought by Naber was granting the Hudson Bay Railway Company the right to operate its trains over any portion of rail lines belonging to CN that would be necessary for Hudson Bay to provide rail service to Naber in Melfort and Star City, Saskatchewan. The Agency analyzed the merits of the running rights requested and concluded that, notwithstanding the significant concerns respecting the level of service provided to Naber and having weighed the benefits flowing from running rights and the repercussions of imposing this remedy, there are other alternatives available at this time to remedy the unsatisfactory service experienced by Naber.

The Agency has ordered a series of eleven (11) operational measures (see Appendix A) dealing with car ordering, allocation, spotting and other elements specifically designed to alleviate the level-of-service problems experienced by Naber. The Agency is of the view that the combination of these measures should provide Naber with a more regular and reliable rail service that is more adapted to its transportation needs, improve Naber's capacity to plan the processing and distribution of its products and facilitate the conduct of its business.

As this is the third complaint of a similar nature filed by Naber against CN, the Agency considers it appropriate to monitor the situation and will ask the parties to report to it on a regular basis for a period of one year following the issuance of this decision.

The Canadian Transportation Agency is a federal administrative tribunal whose procedures are governed by the rules of natural justice which ensure that all parties are dealt with in a fair and equitable way.

For further information, please contact:

Jadrino Huot
Communications Advisor
(819) 953-9957

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APPENDIX A

1. For the purposes of car ordering, allocation and rationing, CN shall consider the maximum car spot capacity of Naber's three processing facilities to be as follows:

   • Melfort, Saskatchewan: 34 hopper cars and 10 boxcars or 46 hopper cars
   • Star City, Saskatchewan: 20 hopper cars
   • Kathryn, Alberta: 23 hopper cars

2. At time of rationing, CN shall not ration the car allocation of Naber under the general car allocation to less than the number of cars specified in Item No. 1 in a Grain Shipping Week, or the actual number of cars ordered by Naber.

3. At time of rationing, where Naber orders cars under the general car allocation and through the West Coast Staging Program, the number of cars allocated to Naber under the general car allocation shall not be affected by the number of cars reserved by Naber through the West Coast Staging Program. This will provide Naber access to cars beyond the one full car spot allocation in a Grain Shipping Week at a facility.

4. For the processing facility located in Melfort, Saskatchewan, CN shall spot the cars allocated for a Grain Shipping Week in one or two switch operations, as requested by Naber.

5. When requested by Naber, CN shall pick up loaded rail cars twice a week at each processing facility.

6. In respect of direct-hit shipments, CN shall allow Naber to order cars for a Grain Shipping Week that is up to two weeks ahead of the estimated time of arrival of the vessel.

7. CN shall allow Naber to provide, each Friday, its rail car orders for the Grain Shipping Week starting nine days hence rather than the current requirement of Tuesday.

8. Under the West Coast Staging Program, CN shall allow Naber to book up to three contracts in respect of a single origin facility in a single Grain Shipping Week. This will allow Naber to book cars in advance for shipment in a future Grain Shipping Week to multiple West Coast destination facilities.

9. CN shall allow Naber to participate in the West Coast Staging Program, even though Naber does not have an available approved line of credit with CN, provided that Naber supplies to CN a letter of credit from a major financial institution that secures Naber's obligations to CN under the West Coast Staging Program.

10. CN shall assist Naber financially with the information and communication system development necessary to provide Naber the capability to transmit bills of lading to CN through electronic data interchange in order to qualify for rebates in CN's Efficiency Payment Program.

11. For a period of one year following the issuance of the order, CN and Naber are to report to the Agency, on a monthly basis, the number of cars by type ordered by Naber and the number of cars by type delivered by CN, with a justification for any shortfall. Reports may also include specific characteristics of the service provided that may raise concerns. Such reports should be submitted to the Agency no later than one week following the end of each calendar month.