WGRF To Receive Major Payout, as CN Rail Exceeded Revenue Cap by Almost $5 Million

CN Rail exceeded its volume-based “cap” on grain revenue in the 2013-14 crop year by almost $5 million, according to a ruling issued by the Canadian Transportation Agency today.

The CTA says CN’s grain revenue of $672,110,852 was $4,981,915 above its entitlement of $667,128,937. Under federal regulations, the railway now has 30 days to pay the amount by which it exceeded the entitlement, plus a five percent penalty of $249,096, to the Western Grains Research Foundation. According to the research organization’s website, this would be the second largest rail revenue cap payment WGRF has received in a single year.

Meanwhile, CP Rail’s grain revenue of $623,620,236 was $1,653,714 below its entitlement of $625,273,950.

Together, both railways moved almost 19 percent more grain in 2013-14 than in the previous crop year, shipping a total of 38.5 million tonnes. The average length of haul was 945 miles, or just one mile longer than the previous year.

CN spokesperson Mark Hallman said the company is “reviewing the Agency’s calculations,” noting the amount of grain moved by CN was “12 per cent greater than the previous best tonnage under the revenue cap regime of 17.1 million metric tonnes in 2011-12.”

“As a producer I would prefer that the railways stay below their maximum revenue entitlements, however when these entitlements are exceeded WGRF and its Board of Directors will invest these funds into field crop research to the benefit of all western Canadian farmers,” said Dave Sefton, WGRF Board Chair.

The maximum revenue entitlement, sometimes called a “revenue cap,” allows CN and CP to set their own rates for services, provided the total amount of revenue collected remains below the limit set by the CTA. The ceiling is determined using a formula that accounts for actual tonnage of grain hauled, average length of haul and an inflation index that is supposed to account for labour, fuel, material and capital purchases.

Last year, CN was $6.3 million under its cap, while CP exceeded its limit by $177,961,

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