WINNIPEG, Manitoba — According to a wire service, a landmark hearing began on Monday to decide if a maverick Prairie railway can force Canadian National Railway Co., Canada’s largest rail company, to open its lines to competition.
“Getting to this public hearing has been, in many ways, like trying to give your cat a bath,” Forrest Hume, the lawyer representing Edmonton, Alberta-based Ferroequus Railroad Co., told the Canadian Transportation Agency hearings.
“You know that your cat needs a bath, you know that he would benefit from having a bath, but he doesn’t like it one bit,” said Hume, describing opposition to the plan by Canada’s two major rail operators.
Both CN and Canadian Pacific Railway (Toronto:CP.TO – news) are opposed to Ferroequus using their lines and have dismissed the new company as only a “virtual” railway because it does not actually own any locomotives or rolling stock.
Ferroequus is seeking the right to use 1,900 kilometres (1,200 miles) of CN tracks to haul about 800,000 tonnes of grain annually from Camrose, Alberta, to the Pacific port of Prince Rupert, British Columbia.
Ferroequus said its business plan, which involves collecting grain from CP, whose line intersects the CN line at Camrose, will offer farmers lower costs and generate about C$22 million ($14 million) in annual revenues for the firm.
Transport analysts compare the situation to small telecommunications companies leasing lines from a major firm to sell long distance services or to gas companies renting space on pipelines to ship natural gas.
The stakes are high because the outcome of the hearings could set a precedent for competitive access to rail lines, analysts say.
The provision to extend running rights on Canada’s main rail lines has long existed in legislation, but has only been challenged in recent years.
A handful of short-track rail companies have applied to use the two big rail companies’ lines, but their applications were either dismissed on jurisdictional grounds or withdrawn prior to hearings. The Transportation Agency bases its rulings on public interest.
“There can be no doubt that the need for competitive rail access exists. It has been recognized as necessary for a long time in this country, and is an idea whose time has finally come,” said Hume.
CN, North America’s fifth largest railway, said on Monday that the Ferroequus plan is unrealistic, provides inadequate compensation and amounts to expropriation.
“What you’ve got here is an attempt by somebody who doesn’t have the network, who didn’t build it, who doesn’t maintain it and who wants to use it in a way that we don’t think is practical,” said Jim Feeny, a spokesman for CN.
CN will argue that granting the upstart company running rights could hurt its operating efficiencies and hamper investment.
“This is now a case where an individual has an idea and he’d really like to try it out. But if the experiment, if the idea flounders, the impact will be significant,” Marc Shannon, senior council for Canadian Pacific, told the tribunal.
Ferroequus, founded by Tom Payne, a former CP Rail locomotive engineer who also created the regional Alberta railway, Central Western Railway Corp., has said it plans to lease 11 locomotives along with 325 covered hopper cars, from federal, provincial and Canadian Wheat Board fleets.
Among Ferroequus’s supporters is the heavy-hitting Wheat Board, the marketing agency that has a government granted monopoly on all western Canadian wheat, barley and durum destined for export.
“The bottom line is money and whether or not we can find ways to cut costs to farmers,” said board spokesman, Rheal Cenerini.
The hearing is expected to take about two weeks.