Decision No. 155-R-2011

May 3, 2011

File No. T6650-2

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Introduction

[1] The Canadian Transportation Agency (Agency) is required to determine the Canadian National Railway Company's (CN) and the Canadian Pacific Railway Company's (CP) western grain revenue and revenue cap entitlements (Revenue Cap) by December 31 of each year. For crop year 2008-2009, the Agency made its ruling on December 31, 2009 in Decision No. 529-R-2009.

[2] On November 10, 2010 CN submitted an application seeking the Agency's review of its determination of CN's tonnage for the purposes of determining its Revenue Cap based on its assertion of new facts and circumstances subsequent to the Agency's ruling.

[3] In its application CN acknowledged that the timing of its request to the Agency coincided with the Agency's finalization of the Revenue Cap decision for crop year 2009-10. CN therefore indicated that consideration of the application could be deferred until the new year.

Background

[4] Subsection 151(1) of the Canada Transportation Act (CTA) states that the formula used by the Agency in its determination of a prescribed railway company's Revenue Cap for a crop year includes both the number of tonnes of grain involved in the company's movement of grain in the base year and, as determined by the Agency, the number of tonnes of grain involved in the company's movement of grain in the crop year.

[5] A railway company's revenue is based on a per car amount and, as such, the actual revenue received for a grain movement does not vary with reported tonnage. However, the Revenue Cap entitlement does vary directly with reported tonnage. Therefore, if a source used for determining the appropriate tonnage is greater or lower than another source, then the Revenue Cap entitlement may be increased or decreased accordingly.

[6] CN is requesting that the Agency revisit the tonnage issue for crop year 2008-2009 and accept the higher tonnage figure CN submitted in place of the figure determined by the Agency based on Canadian Grain Commission (CGC) data made available at the time of Decision No. 529-R-2009. Given that CN's revenue exceeded its Revenue Cap in crop year 2008-09, an increase in the total tonnage figure, and a consequent increase in the Revenue Cap, would result in CN being entitled to a partial reimbursement of the excess amount paid by CN to the Western Grains Research Foundation.

[7] In Decision No. 529-R-2009 the Agency ruled that the tonnage reported by the CGC was the official source for Revenue Cap purposes. The relevant sections of that Decision are as follows:

[34] The Agency only became aware in 2009 that in this and previous crop years CN has not been submitting CGC data. Rather, CN has adjusted the CGC data without the prior authorization or agreement of the Agency. Furthermore, both railway companies have advised that they do not intend to use CGC data for Revenue Cap purposes and intend to submit tonnage information from other sources in the future.

[35] The Agency finds that CN and CP have not made compelling arguments as to why the Agency should reject CGC data and accept other sources of information of their choosing. The Agency notes that this data is being used for regulatory purposes only and this usage by the Agency does not in any manner restrict the commercial practices of the railway companies. Subsection 151(1) of the CTA requires the Agency to determine the tonnage moved. The CGC regularly tests and, if necessary, recalibrates the terminal scales, and it certifies terminal scales on behalf of Measurement Canada. The Agency also notes that CGC has an extensive validation process as well as a dispute resolution process in place that is open to all parties.

[36] The Agency finds that the CGC unload weights represent the most accurate and neutral accounting of the grain tonnage shipped to terminals and transfer elevators and its methodologies are applied consistently to both railway companies.

[37] In the interest of fairness, before accepting any alternate methodology, the Agency would need to be satisfied that the methodology would meet essential requirements of consistency and reliability and that it be verifiable by a qualified third party and/or the Agency. Furthermore, another data source meeting these requirements would need to be fully tested before adoption and would only be applied following the testing process.

Agency finding

[38] Based on its analysis, and the use of CGC tonnage and railway company-submitted weight information as noted above, the Agency finds that the tonnage for CN is 14,980,650 and for CP is 16,215,713.

[39] Unless otherwise determined by the Agency, the Agency also directs CN and CP to report, for all future years' determinations (beginning with crop year 2009-2010), Revenue Cap tonnages using the weights obtained from the CGC, without any adjustments.

[40] The Agency encourages the railway companies to use the CGC's dispute resolution program if they have difficulties with the data being submitted to them by that organization.

CN's submission

[8] CN submits that since the issuance of Decision No. 529-R-2009 it has been working, in collaboration with CGC, CP and Agency staff, to improve the CGC weights process. CN states that "the collaboration yielded a better understanding of the CGC data, the challenges involved in matching railway data to CGC data…" CN asserts that the "improved process, when applied to the 2008-2009 crop year data, yields significantly different results than that of the process used by the Agency in late 2009."

[9] CN also claims that its analysis, based on the "improved process," leads it to conclude that the major source of variances between the Agency's process and the improved process relates to partial unloads. CN submits that, although not typical, partial unloads do occur when a hopper car is unloaded at separate times, dates and, even, locations.

[10] CN notes that partial unloads introduce complexity in the reconciliation of CGC data and without a sufficiently sophisticated matching process, reported tonnage will be understated. CN asserts that it is necessary to ensure that partial unloads for a hopper car are added together to account for the total tonnage actually unloaded for Revenue Cap purposes. CN indicates that it analyzed 100 hopper car movements in detail to compare the results of the process used by the Agency to the new process, and this analysis highlighted flaws in the process used by the Agency in late 2009.

[11] In addition, CN refers to incomplete data supplied by CGC which may be based on the occasional difficulty CGC had in determining whether an unloaded car was from CN or CP.

[12] CN argues that had these new facts and circumstances been available to the Agency, the Agency would have reached a different decision in the determination of the Revenue Cap for crop year 2008-2009.

[13] CN concludes that the Agency should revise the CN tonnage figure in Decision No. 529-R-2009 upwards by 6,974 tonnes, to the figure originally submitted by CN. By extension, CN requests that the full amount of the adjustment made by the Agency for the impact of the CGC weight, i.e., $223,040 plus the associated penalty of $11,152 be reimbursed to CN.

[14] In its application, CN submits that specific conditions have been met for the Agency to review a previous decision under section 32 of the CTA. CN referred to Decision No. 649-R-1997 and provided the following extract from that Decision:

It is important to stress at the outset that the review process contemplated under section 32 of the CTA is not an open-ended authority for the Agency to review its decisions and orders. The Agency's jurisdiction under this section is circumscribed and only arises if it is determined that there has been a change in facts or circumstances pertaining to the decision or order since its issuance. The Agency must first determine whether there has been a change in facts or circumstances pertaining to its decision or order and, if so, whether such change is sufficient to warrant a review, rescission or variance of the decision or order. (Emphasis added by CN.)

Issue

[15] Does the data acquired by CN pursuant to the application of a new process for determination of reported tonnage, and the alleged flaws from using the existing process, constitute a change in facts or circumstances since the issuance of Decision No. 529-R-2009 which would warrant a variance of Decision No. 529-R-2009 and, if so, how should Decision No. 529-R-2009 be varied?

Analysis and findings

[16] There are important underlying principles to recognize when the Agency is assessing whether there has been a change in facts or circumstances since the issuance of a decision and, if so, whether the change is sufficient to warrant a variance.

[17] First, the burden of proof lies with the applicant to provide the Agency with substantive evidence that there has been a change in facts or circumstances. Second, a section 32 application should not be used to introduce evidence that was known to the applicant or discoverable through due diligence prior to the original determination having been made. Third, a section 32 application is not to be used to provide an applicant with an opportunity to complete a record. Fourth, there must be a real change in the facts or circumstances which is to be weighed against the basic legal principle in favour of finality of decisions.

[18] In that context, and putting CN's submissions in the additional context of the data provided by CN during the Revenue Cap review for the 2008-2009 crop year, the Agency makes the following observations.

[19] First, CN provides as evidence and relies on a sample of 100 hopper car movements. This sample is very small in proportion to more than 100,000 grain shipments made by CN in crop year 2008-2009.

[20] CN has provided no explanation of how it selected these 100 movements, nor how the movements would be representative of CN's traffic, and thus be applicable as a basis for the Agency to extrapolate what the overall impact might be.

[21] On the face of this small sample analysis, it is difficult for the Agency to conclude that there is substantive evidence of a change in facts or circumstances. Based on the submissions, the Agency therefore finds that CN has not met its burden of proof.

[22] Second, CN acknowledges that the purported improvements to the existing CGC process have been developed by collaborative efforts among a number of interested parties. These efforts arose out of the determination by the Agency in Decision No. 529-R-2009 that data being submitted before 2009 by CN was not CGC data, but CGC data adjusted by CN without the prior knowledge, authorization or agreement of the Agency. This is clearly indicative that CN itself was aware, prior to Decision No. 209-R-2009, of possible flaws in the tonnage reported by CGC and on which the Agency based its decision. Accordingly, the Agency finds that the evidence now being introduced by CN was evidence that, if not actually known to CN, was discoverable by CN through due diligence prior to Decision No. 529-R-2009.

[23] In addition, as noted in paragraph 35 of Decision No. 529-R-2009, notwithstanding arguments made by CN, and CP, that sources other than that of CGC should be used for tonnage, the Agency decided that the arguments were not compelling enough to merit a change in the methodology then used by the Agency. This application by CN now before the Agency would appear to be a more detailed re-argument of the same issue, which has already been rejected by the Agency in Decision No. 529-R-2009 on reasonable grounds.

[24] Third, CN, in its submission, acknowledges that the data now provided has been derived from a detailed analysis by CN of hopper car movements that had been previously filed with the Agency for the determination made in Decision No. 529-R-2009. The Agency therefore finds that this application by CN is merely an attempt to complete or supplement the existing record, which is not a ground for a section 32 application.

[25] Finally, Decision No. 529-R-2009 already addresses the issue now raised by CN in this application. The methodology as set out in paragraphs 36 and 39 of Decision No. 529-R-2009 is absolutely clear. The Agency has determined that CGC weights are the most accurate and neutral accounting of the grain tonnages and they should be applied without adjustment. Furthermore, as set out in paragraph 37 of the same decision, the Agency stated that it will only consider changes to the existing methodology when it deems consideration of a change is warranted and only implemented after thorough testing.

[26] In this application CN is effectively arguing that the Agency should endorse a new methodology after the fact and apply it retroactively without a full and fair prior review and endorsement by the Agency. As noted above, in assessing the merits of a section 32 application, the Agency will weigh changes in the facts and circumstances against the basic legal principle in favour of finality of decisions. In this instance, any change in facts and circumstances, which, in any event, has not been accepted by the Agency, is far outweighed by the reasoned finality of Decision No. 529-R-2009 based on accepted methodology.

Conclusion

[27] The Agency finds that there has been no change in facts or circumstances that would warrant a review or variance of Decision No. 509-R-2009 pursuant to section 32 of the CTA.

Agency decision

[28] The Agency dismisses the application.

Members

• Geoffrey C. Hare
• Raymon J. Kaduck
• John Scott