The Canadian Transportation Agency has ruled Canadian National and Canadian Pacific exceeded their Western grain revenue entitlements for crop year 2014-2015 and will be required to repay the difference.
The Canadian government has fined the country’s two largest freight railways a total of $9.45 million Canadian (U.S. $6.81 million) for surplus revenues from hauling western grain during the 2014-2015 crop year, according to a statement from the Canadian Transportation Agency.
The agency ruled Canadian National Railway Company (CN) and Canadian Pacific Railway Ltd (CP) exceeded their respective Western grain revenue entitlements of C$738 million and C$722 million by about C$6.9 million and C$2.1 million, respectively.
In addition to repaying the surplus revenues, the Class I railroads have each been assessed 5 percent penalties in the amounts of $343,330 for CN and $106,858 for CP.
The agency noted CN and CP grew their combined Western grain volumes more than 7.4 percent to over 41 million tons in the 2014-2015 crop year compared to the previous period.
CP spokesman Jeremy Berry told Reuters news service the railway is reviewing the agency’s ruling, while a CN spokesperson could not immediately comment.
Canada implemented the grain revenue cap in 2000 as part of the Canada Transportation Act after the Canadian government eliminated a previous grain-by-rail subsidy called the Crow Rate. The entitlement, which applies to revenues earned by railways moving grain from the Western Canadian crop belt, allows companies to set their own rates for services, provided the total amount of revenue collected from their shipments of Western grain remains below the ceiling set by the Agency.
The Canadian Transportation Agency said all money collected by the program will be paid to a farmer-financed and directed research funding organization called the Western Grains Research Foundation.
Both railways have openly opposed the Western grain revenue cap, but farmers and industry groups argue the entitlement cap is necessary due to a lack of competition in the Canadian rail market.
Canadian Pacific, meanwhile, has been in the news quite a bit lately for engaging in a very public takeover attempt of struggling U.S.-based Class I railway Norfolk Southern that may result in a proxy fight over corporate leadership.
Canada fines railways $6.8m for surplus grain revenues
