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CN gets revenue-cap cash back on appeal

The ag research fund that benefits in years when Canada’s railways earn too much revenue hauling Prairie grain must now pay back over $128,000 to Canadian National Railway (CN).

The Western Grains Research Foundation reported Tuesday that it will pay back $128,468.47 to the railway, following a successful appeal by CN to the Canadian Transportation Agency (CTA).

Federal transportation legislation requires that when either CN or Canadian Pacific Railway (CPR) exceed their grain revenue caps, they must pay the excess plus a five per cent penalty to the WGRF’s endowment fund for crop research.

CN in January last year said it would appeal the CTA’s ruling on the company’s 2005-06 grain revenue. CN argued that the penalty charged by the CTA was $522,383 too high; the CTA had initially ruled CN had exceeded its grain revenue cap by about $2.7 million.

CN said at the time that the revenue cap imposed on it that year should instead have been adjusted based on the math used to calculate intermodal pickup-and-delivery and demurrage overages, the WGRF said Tuesday.

The WGRF said its repayment will include $116,900 for the reduced revenue cap overage, $5,845 reimbursement of the five per cent penalty initially collected and $5,723.47 for CN’s share of interest earned, dating back to when the appeal was made.

Loss of interest

The refund doesn’t jeopardize any specific research, because the WGRF put CN’s excess-revenue donation from that year into a trust account until the CTA could rule on CN’s appeal.

“We are happy that a decision has been reached and that the balance of the funds can now be invested into research that benefits farmers across Western Canada,” WGRF spokesperson Amanda Soulodre said in a press release Tuesday.

Nevertheless, the WGRF said, the refund to CN will translate to the loss of about $6,137 in interest income per year for the endowment fund. That interest, if collected over five years, would support a one-year research project, the WGRF said.

CN wasn’t the only railway to successfully appeal against the CTA’s rulings for 2005-06. The WGRF in October last year was told it had to refund about $871,000 to CPR, which appealed to the CTA on the $1.6 million it was charged based on the 2005-06 grain revenue cap.

CN and CPR also both plan to challenge the CTA’s decision in February to substantially reduce their revenue cap for 2007-08. The CTA ordered a $72.2 million reduction in the grain revenue cap, retroactive to Aug. 1 last year. The agency said “significant improvements” in railway operating efficiency had reduced the railways’ costs of maintaining federally-owned grain hopper cars.

The CTA in December last year also ruled that CPR had exceeded its 2006-07 cap by $3.76 million. CPR hasn’t yet said if it will appeal that ruling.

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