(The Canadian Press circulated the following article by Dirk Meissner on July 14.)
VICTORIA, B.C. — The controversial decision by British Columbia’s Liberal government to unload its Crown-owned railroad in a $1-billion deal with a private, U.S.-controlled railway company now is final, says Transportation Minister Kevin Falcon.
The deal, tainted by an ongoing police investigation and intense political battles over broken election promises, allows British Columbia to pay off the railway’s debt and heralds the start of an ambitious economic plan to revitalize the province’s north, he said Wednesday.
CN, a former federal Canadian Crown corporation, said it will immediately start integrating BC Rail into the company’s vast North American system.
“We are very pleased to close this important transaction,” E. Hunter Harrison, CN president and chief executive officer, said in a statement.
“We will now move forward with our plan to deliver better service and improved transit times to BC Rail shippers,” he said.
Falcon said the deal, first announced late last year, was a lengthy political battle but one that will pay dividends for British Columbia.
“The history of BC Rail in terms of the ability to make a profit has been pretty sad,” he said.
“We’ve seen almost a billion dollars in losses over the last 15 years – half a billion dollars of debt that’s saddling the BC Railway company – and frankly very little public appetite to divert scarce tax dollars from health care and education into that railway.”
Falcon said BC Rail has been turning a profit over the last 18 months, but that has come at the expense of at least 600 railway jobs.
The government will use the $1 billion to pay off an estimated $500 million BC Rail debt and at least $170 million of the remaining money to spur investment in the province’s north, he said.
The projects include a northern development initiative to fund economic and tourism projects, expansion of Prince Rupert’s port facilities and programs for First Nations.
Falcon said the government couldn’t have embarked on its northern initiative without putting BC Rail in private hands.
“I don’t for a second believe that a government run railway can be anywhere close to as efficient as a private sector operator can be,” he said.
“The best example is CN,” said Falcon. “It used to be a Crown operated railway. It was grossly inefficient and lost billions of dollars over the years.”
CN now is one of the top-earning private railways in North America, he said.
The federal Competition Bureau granted final approval for the deal earlier this month.
CN Rail and the B.C. government announced a partnership last year that would see the company take over the freight operations of BC Rail under a renewable 60-year lease.
The government maintains ownership of the line itself, which runs from North Vancouver to northern British Columbia.
The deal has been controversial because the B.C. Liberals promised not to sell the railway during their 2001 election campaign.
Falcon said the government is not selling BC Rail, because the rail bed, tracks and rights-of-way will remain in public hands.
Opponents said the deal will lead to job losses for British Columbians and tough times ahead for small northern communities.
Falcon said CN may cut jobs in the acquisition, but insisted the agreement will result in increased business for the north and more jobs.
CN announced earlier it has negotiated agreements with three connecting railways at Vancouver – Canadian Pacific, Burlington Northern Santa Fe and Union Pacific.
The 1,577 kilometre BC Rail main line runs from North Vancouver to Fort Nelson, including the resource-rich northern community of Tumbler Ridge.
Falcon maintained that the CN deal was clean despite ongoing police investigations and previous complaints about unfair treatment by failed bidders.
He cancelled the bidding process for a railway spur line at Roberts Bank near Vancouver after the RCMP said it was part of an ongoing investigation last spring.
Last December, the RCMP raided offices at the legislature as part of an long-term drug and money-laundering probe.
The chief aide to Finance Minister Gary Collins was fired and an assistant to former transportation minister Judith Reid was suspended with pay.
No charges have been laid so far.
Police said their investigation does not involve any elected officials.