OTTAWA — Few people would stand in front of an onrushing freight train but Tom Payne is placing himself before two of them.
The National Post reports that the Edmonton businessman is taking on Canadian National Railway Co. and Canadian Pacific Railway Co. in a fight to use their tracks to ship grain on his railway, Ferroequus Railway Co. Ltd.
It’s a case observers say could set a significant precedent for the railways — with Mr. Payne arguing it will provide choice for shippers and CN and CPR warning it amounts to expropriation that could lead to track closures and possibly a return to taxpayer subsidies for railways.
“They just don’t like the idea of competition in the railway industry. This is the first time in 100 years that true competition has reared its ugly head,” said Mr. Payne, who has spent more than half his 52 years working on railways.
He began his career as a rail yardman in the early 1970s before becoming a CPR locomotive engineer. After a decade driving trains, he founded Central Western Railway Corp., an Alberta regional railway that evolved into the publicly-traded RaiLink Ltd., which was bought out by RailAmerica Inc. of Florida for $73-million in 1999.
Through his personal holding company he founded Ferroequus after stepping down as vice-president of RaiLink in 1998.
“I just think it’s the right thing to do. Why shouldn’t people have the benefit of the economy of the regional railway for price and choice of service?” he said.
For nearly four years, Mr. Payne has been fighting with CN and CPR before the Canadian Transportation Agency, spending “millions of dollars” trying to get running rights that would allow him to use the majors’ lines.
Its first bid to carry freight from North Battleford, Sask., to Prince Rupert, B.C., on CN’s lines was turned down by the transport regulator last May. But a new plan, this time to carry grain to the port from Camrose, Alta., has met more success, with the CTA agreeing to hold a hearing on the issue April 29. Where the plans differ is that in the first case Ferroequus would have not only used CN’s lines but also solicited traffic from customers along its route.
The new proposal would see Ferroequus pick up grain brought to Camrose on CPR lines by shifting it on to the CN line that intersects there. CN and CPR, which has intervenor status in the case, are both objecting to Ferroequus’ plan.
While grain is an important product for the railways and they do not wish to forgo any revenue, they see the case as more threatening because they do not want anyone given access to their lines.
“Forced access would threaten the survival of low-density sections of CN’s Canadian network, undermine future rail investment by CN and potentially require the return to taxpayer subsidization of Canadian railways,” CN said Friday, when announcing it will ask the Federal Court to stop the April CTA hearing.
Mr. Payne said CN stands to benefit from his plan because Ferroequus will pay to move across its lines grain that would normally go west to Vancouver on CPR’s track.
The situation is comparable to gas companies renting space on pipelines to ship gas or telecommunications companies renting Bell Canada’s lines to sell long distance services, he said.
“It gets the railways to offer more competitive rates to farmers,” said Charray Dutka, a planning and policy advisor for the The Canadian Wheat Board, which is supporting the Ferroequus bid.
Barry Prentice, a professor at the University of Manitoba Transport Institute, said the situation could set a significant precedent and both railways are nervous because they may have to compete at all interchanges for traffic if Ferroequus succeeds.
“In many respects the regulators are in a difficult bind because they have to weigh off the benefits and rights of shippers versus the carriers and the viability of their operations,” he said.
Adding to the sensitivity of the case is that Ottawa is preparing to rewrite the transport act and the outcome could shape the new act.
“I always look at this that there is a quid pro quo in that the carriers provide the infrastructure and the government provides sufficient shelter for their market to enable them to pay for it,” he said.