(The following article by Scott Simpson was posted on the Vancouver Sun website on November 25.)
VANCOUVER — At least 1,200 BC Rail employees could lose their jobs in the wake of Premier Gordon Campbell’s announcement expected today that the government has reached a $1-billion deal with Canadian National Railway to privatize the freight operations of BC Rail.
The government is expected to follow Campbell’s announcement this afternoon with the introduction in the legislature of a bill enabling the deal to proceed — and the government will extend the sitting of the legislature by a week to allow for additional debate.
The government issued a brief media advisory Monday afternoon, saying only that Campbell will make an announcement about BC Rail.
CN was one of three finalists in bidding to take over the provincially owned railway.
The other bidders, Canadian Pacific and OmniTRAX/Burlington Northern Santa Fe, have acknowledged CN as the successful candidate to take a 60-year lease on BC Rail’s freight operations.
CN’s bid includes plans to close down BC Rail’s North Vancouver operations while enlarging the provincial railway’s facilities in Prince George.
About half the money that B.C. gets from the deal will be invested in northern B.C. communities, notably where the adverse impacts of the deal will be felt.
A confidential document written for the government by Travacon Research Ltd. states that at least 900 current BC Rail employees will lose their jobs in a CN takeover, due to duplication of work among CN and BC Rail staff.
Travacon says a further 318 job losses will occur among BC Rail staff at Squamish and Lillooet if CN, as expected, abandons a 350-kilometre section of the existing BC Rail line between Chasm — near 100 Mile House — and North Vancouver.
That means only about 400 current BC Rail staff will hang on to their jobs — although that number could improve, depending on the size and scope of CN operations in Prince George after the deal.
The Travacon document, which was obtained by The Vancouver Sun, was written by the principal advisors to the government/BC Rail team, which is weighing the bids for BC Rail.
Travacon reports that BC Rail’s biggest customers oppose a sale to CN on the grounds that it would reduce competition and lead to a possible decline in service.
Travacon said closure of the southern portion of the BC Rail line will also mean “probable elimination of Squamish as a significant port of export.”
By contrast, Travacon reports that Canadian National would cut 287 non-union jobs and make a “minimal reduction of unionized positions.”
OmniTRAX/BNSF would require even fewer layoffs than CP, Travacon reports.
The key element of CN’s original bid include a pledge to develop what it call an “open gateway rate and service commitment.”
That includes a “competitive proportional rate matrix” between key geographical areas on the BC Rail network and interchanges with CP, BN and Union Pacific in Vancouver.
CN promises that connection rates “will be lower than BC Rail’s from current divisions or rates to these interchanges.”
CN promises to maintain an open-book policy with respect to rates, allowing connecting railways to quote through rates directly to customers “independently and without any involvement by CN.”
“In this respect the devil is in the details,” says Travacon.
For examples if CN sets gateway rates high enough, it would deliver itself a competitive advantage at the expense of its rivals.
Travacon notes that CN’s bid does not state how long the gateway policy would apply, noting that a five-year commitment in the context of a 60-year lease would be “substantially worthless.”
One forest products shipper interviewed by Travacon said CN implemented a similar concept when it took full control of the Northern Alberta Railway.
“The shipper reported that CN service for CP cars under that concept was so unreliable that the open gateway concept was quickly discarded and was essentially worthless,” Travacon says.
BC Rail is the leading carrier of forest products in B.C., annually hauling three billion board feet of lumber and 1.5 billion square feet of panel products.
Rail constitutes 20 per cent of the delivered cost of a standard two-by-four moving from Prince George to Chicago.
Travacon said shippers favour Canadian Pacific, and do not question the government’s decision to privatize BC Rail freight operations.
BC Rail “has been allowed to deteriorate to the point were its reliability, efficiency and cost effectiveness are compromising the efficiency of the BC forest industry.”