(The following story by Peter Kennedy appeared on the Globe and Mail website on November 15.)
VANCOUVER — Union officials at BC Rail Ltd. are bracing for major cutbacks as the British Columbia government appears poised to table legislation that would allow for the sale of the Crown-owned corporation.
B.C. Transportation Minister Judith Reid refused yesterday to say exactly when the legislation will be introduced or confirm reports that Canadian National Railway Co. has emerged as the front-runner in the bid to buy BC Rail.
Ms. Reid declined to comment on the timing of any agreement. “We are still working our way through proposals from the three proponents,” she said. The enabling legislation she said is “proposed to be introduced into the B.C. Legislature. . . . But it is not up to me to determine the timing of that,” she said
It is widely believed that the legislation will be in place as early as next week to allow the sale to proceed, and that CN has outmanoeuvred Canadian Pacific Railway Ltd. and a consortium of U.S. giant OmniTrax and Burlington Northern Santa Fe Co. in their bid to operate BC Rail.
The province plans to retain ownership of the railway tracks, the railway bed and the existing rights of way, selling the equipment and other assets to a buyer that would be responsible for all freight and passenger operations.
Ms. Reid said any proceeds from the sale would be used to pay off the corporation’s $500-million debt.
That in turn is expected to spark a restructuring that a senior union official said could eventually lead to the elimination of up to 60 per cent of BC Rail’s existing employees.
. “It is a sad day,” said Lance Yearley, vice-chairman of the Council of Trade Unions, the umbrella organization for unionized employees at the Crown corporation.
BC Rail is Canada’s third largest railway with annual revenue of more than $310-million, 1,600 employees and valuable real estate assets including its North Vancouver head office.
In an internal study of the possible outcomes of a sale to CN, BC Rail predicted that CN could achieve a $123-million improvement in annual operating income synergies. In a briefing that was released in August, BC Rail said the cost saving could be realized through:
The realignment of existing BC Rail networks, and the diversion of traffic to CN operations east of Prince George, B.C., as well as the transfer of BC Rail’s traffic control functions to Edmonton.
The elimination of most management functions at BC Rail. These would be absorbed by existing CN groups in Montreal, Edmonton, Winnipeg, and to a lesser extent, Vancouver, the internal report stated.
Mr. Yearley said the union believes CN will eventually abandon the BC Rail network between Lillooet and Vancouver, which he said is expensive to maintain and was damaged by recent flooding in the province.
The union is also bracing for the sale of BC Rail’s head office in North Vancouver, which the union believes would no longer be needed following an acquisition by CN.
Officials at both BC Rail and CN declined to comment on reports that the provincial government is about to end months of speculation by selling the Crown corporation to CN. “We have not been part of the process,” said Alan Dever, a spokesman for BC Rail in Vancouver.
Mrs. Reid said the process of working through proposals from each of the bidders took longer than expected because of concerns raised by communities and shippers that use BC Rail networks.
“We want industries to be well served and we want to know that the railway is going to be invested in and there for the long term,” she said.
Still, she said the province has been anxious to find a partner to operate the railway because it believes that after writing off $800-million of BC Rail debt in the past decade, that is the best way to fund its future growth.
“This is not a viable business for the province to be operating,” Ms. Reid said.
On the rails
BC Rail has 2,315 kilometres of mainline and 740 kilometres of industrial, yard and track sidings throughout the province. About 80 per cent of its revenue comes from the transport of goods such as forest, energy and agricultural products.