Decision No. 673-R-2004

December 10, 2004

File No. R 8005/K2

On November 25, 2004, Kettle Falls International Railway Company (hereinafter KFIRC) applied to the Canadian Transportation Agency (hereinafter the Agency) for the certificate set out in the title.

KFIRC will acquire through a purchase and a lease agreement certain railway lines of the Burlington Northern and Santa Fe Railway Company (hereinafter BNSFRC) between the state of Washington, United States of America, and the province of British Columbia, Canada.

Subsection 90(1) of the Canada Transportation Act (hereinafter CTA) provides that no person shall construct or operate a railway without a certificate of fitness. Section 87 of the CTA defines a railway, in part, as a railway within the legislative authority of Parliament.

Subsection 92(1) of the CTA provides that the Agency issue a certificate of fitness for the proposed construction or operation of a railway if the Agency is satisfied that there will be adequate liability insurance coverage for the proposed construction or operation as determined in accordance with the Railway Third Party Liability Insurance Coverage Regulations, SOR/96-337.

Therefore, in order to obtain a certificate of fitness pursuant to section 92 of the CTA, an applicant must demonstrate that the certificate applied for relates to a railway that is within the legislative authority of Parliament.

The Agency finds that KFIRC is subject to federal jurisdiction by virtue of paragraph 88(2)(a) of the CTA, as it is a company operating a railway from the United States of America into Canada.

With respect to the adequacy of the insurance coverage, the Agency has reviewed the material on file and is satisfied that there will be adequate third party liability insurance coverage, including self-insurance, for the railway operation of KFIRC.

The Agency's review of KFIRC's financial capability to self-insure for the amount of the self-insured retention was based on the confidential financial statements of its parent company, OmniTRAX, Inc., and the indemnity agreement between OmniTRAX, Inc. and KFIRC in respect of the amount of self-insurance.

Accordingly, pursuant to subsection 92(1) of the CTA, the Agency will issue a certificate of fitness to KFIRC permitting it to operate a railway in the province of British Columbia through a purchase agreement with the BNSFRC between the Canada/United States border near Laurier, Washington and the Canada/United States border near Danville, Washington of the San Poil Subdivision; and through a lease agreement with the BNSFRC between the Canada/United States border near Waneta, British Columbia and Columbia Gardens, British Columbia of the Kettle Falls Subdivision.