Decision No. 392-R-2008

July 31, 2008

APPLICATION by Peace River Coal Inc. pursuant to section 120.1 of the Canada Transportation Act, S.C., 1996, c. 10, as amended.

File No. T7375-3/08-2

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Background

On April 22, 2008, Peace River Coal Inc. (PRC) requested the Canadian Transportation Agency (the Agency) to issue an order requiring new fuel surcharge rates to apply to the confidential contract for carriage of its traffic by the Canadian National Railway Company (CN).

PRC ships coal from its rail loadout site, known as Station Trend and located southeast of Tumbler Ridge, British Columbia, via CN. PRC has a confidential contract with CN for shipping the coal which incorporates by reference a fuel surcharge tariff.

Preliminary matter

On April 28, 2008, CN filed a Notice of Motion with the Agency to dismiss PRC's application. CN submits that section 120.1 of the Canada Transportation Act (the CTA) is not available to PRC for the following reasons:

1. the fuel surcharge is not an ancillary charge but rather is part of the transportation rate and is therefore excluded from consideration under section 120.1 by virtue of subsection 120.1(7) of the CTA; and,
2. the fuel surcharge is part of a confidential contract between CN and PRC and there are no provisions in the CTA allowing the Agency to amend such agreements.

Issue

Does the Agency have jurisdiction to consider the terms of a confidential contract under section 120.1 of the CTA? If so, is a fuel surcharge part of the rate for the movement of traffic such that subsection 120.1(7) would preclude its consideration under section 120.1 of the CTA?

Positions of the parties

PRC

PRC submits that the CTA was recently amended to allow shippers to complain to the Agency that any charges and associated terms and conditions or the provision of incidental services that are found in a tariff that applies to more than one shipper are unreasonable, and to authorize the Agency to establish new charges or associated conditions.

PRC states that CN announced that it would implement a new fuel surcharge for its customers, effective April 1, 2008, however, CN rejected PRC's request that the new fuel surcharge tariff be applied to its traffic.

PRC states that CN has represented that its fuel surcharge is guided by certain basic principles, specifically, that it must be reasonable, and it must be applied uniformly.

PRC contends that because the new fuel surcharge is not applied to its contract, it must pay CN almost double the cost, which is neither reasonable nor a uniform application of the fuel surcharge to all of CN's customers.

PRC submits that the fuel surcharge that applies to its traffic is not a transportation rate for the movement of its coal, but rather a charge and associated term and condition for the movement of traffic. PRC also argues that the CN tariffs which contain fuel surcharges apply to more than one shipper. PRC, therefore, contends that the fuel surcharge falls within the Agency's jurisdiction under subsection 120.1(1) of the CTA.

CN

CN contends that when section 126 of the CTA relating to confidential contracts was introduced, it was also determined that no regulatory remedy is required when confidential contracts are concluded. CN also asserts that Parliament provided that in the context of level of service complaints, as per subsection 116(2) of the CTA, no order could be made against the provisions of a confidential contract. CN suggests that PRC seeks by this application to have a condition of the confidential contract between these parties modified.

CN maintains that PRC can suffer no prejudice from the dismissal of the present application as PRC made its commercial decisions on the basis of the application of the fuel surcharge, which continues to apply. CN argues that, while it is contained in a separate tariff, the fuel surcharge remains a component of the overall transportation rate.

Analysis and findings

In this case, both parties have agreed that the traffic in question is covered by the terms and conditions of a confidential contract, including fuel surcharges, which are incorporated by reference into the confidential contract between the parties. Although PRC submits that it does not seek to alter any of the terms of the confidential contract, the Agency finds that PRC is in fact seeking to have the fuel surcharge provided for in the contract changed to reflect a different fuel surcharge.

Contracts are entered into willingly and freely by two parties for their mutual benefit. One of the key purposes is to ensure certainty and predictability on matters agreed to for the duration of the contract. The parties are bound by the contract and the Agency has no jurisdiction to change the terms of a contract between parties on application under section 120.1 of the CTA and dismisses the application.

As a result, there is no need for the Agency to consider CN's alternate argument related to whether the fuel surcharge forms part of the transportation rate.

Members

• Geoffrey C. Hare
• Raymon J. Kaduck