Letter Decision No. CONF-4-2016

INTRODUCTION

[1] Richardson International Limited (RIL) filed an application with the Canadian Transportation Agency (Agency) pursuant to sections 127 and 128 of the Canada Transportation Act, S.C. 1996, c. 10 (CTA), requesting that the Agency order the Canadian National Railway Company (CN) to interswitch RIL’s traffic between the siding at its Pioneer Mollard elevator (Mollard elevator), located near Brunkild, Manitoba and the lines of BNSF Railway Company (BNSF) at Winnipeg, Manitoba.

[2] RIL requests that the Agency determine that:

1. An interchange exists between CN and BNSF at Winnipeg for the purposes of interswitching; and
2. RIL’s traffic originating at the Mollard elevator qualifies for interswitching.

[3] RIL also requests that the Agency order CN to:

1. Provide reasonable facilities for the convenient interswitching of RIL’s traffic originating at the Mollard elevator at the interchange between CN and BNSF at Winnipeg; and
2. Interchange RIL’s traffic at the prescribed rates.

[4] A significant factor in this application is that the Mollard elevator is located on a railway line no longer owned by CN. CN transferred the Carman Subdivision to Central Manitoba Railway Inc. (CEMR), a provincial railway company, in 1999. RIL seeks an interswitching order against CN despite the fact that the Mollard elevator is not on CN’s railway line. Recent amendments to the prescribed interswitching distance limits mean that traffic from the Mollard elevator may be eligible for interswitching where CN’s line connects with BNSF’s line of railway in Winnipeg.

[5] RIL argues that although CN transferred the operations of the Carman Subdivision to Central Manitoba Railway Inc. (CEMR), a provincial shortline, CN still retains control of the railway line such that CN can be ordered to interswitch RIL’s traffic from the Mollard elevator. RIL also contends that, pursuant to subsection 128(4) of the CTA, the transfer of the Carman Subdivision to CEMR does not affect RIL’s entitlement to an interswitching rate.

[6] CN argues that the Carman Subdivision is operated by CEMR, an independent railway company that manages and operates its railway lines on its own and that, as a result, interswitching is not available from this location. In addition, CN states that interswitching was not available at the Mollard elevator at the time of the transfer in 1999 and that therefore, subsection 128(4) of the CTA cannot operate to protect an entitlement which did not exist at that time.

[7] This is the first case in which the Agency is required to interpret and apply subsection 128(4) of the CTA, which came into effect on May 29, 1996, when the CTA received royal assent.

ISSUES

1. Can the Agency, pursuant to subsection 127(2) of the CTA, order CN to interswitch RIL’s traffic from the Mollard elevator to the BNSF-CN interchange in Winnipeg?
2. Does subsection 128(4) of the CTA apply with respect to RIL’s Mollard elevator traffic?
3. Is the Agency satisfied that the conditions for interswitching to be ordered are met, that is, a railway line of one federally-regulated railway company connects with a railway line of another federally-regulated railway company and the shipper is located within one of the prescribed interswitching zones from an interchange?

CONCLUSIONS

[8] For the reasons set out in greater detail below, the Agency has decided to grant the application, in part. The Agency finds that:

• There is a CN-BNSF interchange in Winnipeg;
• The Mollard elevator is located within the current, extended interswitching limits of that interchange;
• The Mollard elevator is located on a line of railway operated by CEMR;
• CN does not own or operate or control CEMR’s line of railway;
• CEMR is a provincially-regulated railway company;
• Pursuant to subsection 128(4) of the CTA, the transfer of the operation of the line of railway from CN to CEMR in 1999 does not affect any entitlement to an interswitching rate for traffic originating at the Mollard elevator under the Railway Interswitching Regulations, SOR/88-41 (Regulations), as amended, effective August 1, 2014;
• Pursuant to section 87 of the CTA, the “point of origin” of the subject traffic with respect to determining the interswitching rate is not the Mollard elevator itself but the point where the traffic is transferred from CEMR to CN.

BACKGROUND

[9] On May 29, 2014, Parliament amended the CTA to add subsection 128(1.1) to the interswitching provisions. Subsection 128(1.1) states that the Regulations “may prescribe different distances for the regions or goods that it specifies.” Accordingly, on August 1, 2014, the Agency amended the Regulations, such that the interswitching distance limits were extended from 30 km to 160 km for all commodities in Manitoba, Saskatchewan and Alberta.

[10] RIL operates a network of grain elevators with high-throughput facilities and port terminals throughout Canada and canola crushing and grain milling operations throughout North America.

[11] CN is a Canadian Class 1 federal railway company. It holds Certificate of Fitness No. 97001-8, which permits it to operate or construct railways in Canada.

[12] In 1997, RIL completed construction of its Mollard elevator on, at that time, CN’s Carman Subdivision, near Brunkild, Manitoba.

[13] The Mollard elevator is located at mileage 24.9 of the Carmen Subdivision, a radial distance of approximately 50 km from the CN-BNSF connection point in Winnipeg and approximately 69 km along the line of track. The Mollard elevator is located approximately 41.5 km from the Carmen Junction, the connection point between the Carmen Subdivision and CN’s Rivers Subdivision; this connection point is located at mileage 8.3 of the Rivers Subdivision.

[14] In 1999, CN and CEMR entered into the following agreements (collectively “agreements”):

• Asset Purchase Agreement (APA) pursuant to which CN sold, transferred and assigned to CEMR all of its rights, titles and interests in certain rail lines, including the portion of the Carman Subdivision where the Mollard elevator is located.
• Business Cooperation Agreement (BCA) by which the parties committed to the development of a long-term commercial cooperation and to pursuing their commercial and financial interests.
• Operating, Marketing and Interchange Agreement (OMIA) whose preamble establishes its purpose to [REDACTED]. Further, in [REDACTED], CN and CEMR entered into mutual Running Rights Agreements under which CN has no running rights on the Carman Subdivision.

[15] CEMR is not a railway company within the legislative authority of Parliament, and therefore, it is not required to hold a certificate of fitness.

LEGISLATION

[16] Section 87 of the CTA defines a “railway company” as “a person who holds a certificate of fitness under section 92, a partnership of such persons or a person who is mentioned in subsection 90(2)”. That provision also provides a definition of the term “operate”. The definition includes, “with respect to a railway, any act necessary for [...] the operation of a train.”

[17] In addition, section 87 defines “point of destination” and “point of origin” as follows:

“point of destination” means, with respect to traffic on a railway line that is subject to a transfer described in subsection 128(4) or 129(2), the point where the traffic is transferred from the line of a railway company to a line to which this Part does not apply;

“point of origin” means, with respect to traffic on a railway line that is subject to a transfer described in subsection 128(4) or 129(2), the point where the traffic is transferred to the line of a railway company from a line to which this Part does not apply;

[18] Subsection 90(1) of the CTA prohibits the operation of a railway without a certificate of fitness.

[19] Section 111 of the CTA sets out definitions that are applicable to Part III, Division IV of the CTA as follows:

“interchange” means a place where the line of one railway company connects with the line of another railway company and where loaded or empty cars may be stored until delivered or received by the other railway company;

“interswitch” means to transfer traffic from the lines of one railway company to the lines of another railway company in accordance with regulations made under section 128;

“interswitching rate” means a rate established by, or determined in accordance with, regulations made under paragraph 128(1)(b).

[20] Section 127 of the CTA states that:

1. If a railway line of one railway company connects with a railway line of another railway company, an application for an interswitching order may be made to the Agency by either company, by a municipal government or by any other interested person.
2. The Agency may order the railway companies to provide reasonable facilities for the convenient interswitching of traffic in both directions at an interchange between the lines of either railway and those of other railway companies connecting with them.
3. If the point of origin or destination of a continuous movement of traffic is within a radius of 30 km, or a prescribed greater distance, of an interchange, a railway company shall not transfer the traffic at the interchange except in accordance with the Regulations.
4. On the application of a person referred to in subsection (1), the Agency may deem a point of origin or destination of a movement of traffic in any particular case to be within 30 km, or a prescribed greater distance, of an interchange, if the Agency is of the opinion that, in the circumstances, the point of origin or destination is reasonably close to the interchange.

[21] Subsection 128(4) of the CTA provides that:

For greater certainty, the transfer of a railway line, or the operating interest in a railway line, under Division V or section 158 of the National Transportation Act, 1987 does not affect any entitlement to an interswitching rate.

[22] Subsection 141(3) of the CTA states:

Subject to section 144.1, a railway company may sell, lease or otherwise transfer its railway lines, or its operating interest in its lines, for continued operation.

[23] Finally, subsection 146(2) of the CTA provides as follows:

If the railway line, or any interest of the railway company in it, is sold, leased or otherwise transferred by an agreement entered into through the process set out in sections 143 to 145 or otherwise, the railway company that conveyed the railway line has no obligations under this Act in respect of the operation of the railway line as and from the date the sale, lease or other transfer was completed and has no obligations with respect to any operations by any public passenger service provider over the railway line as and from that date.

ISSUE 1: CAN THE AGENCY, PURSUANT TO SUBSECTION 127(2) OF THE CTA, ORDER CN TO INTERSWITCH RIL’S TRAFFIC FROM THE MOLLARD ELEVATOR TO THE BNSF-CN INTERCHANGE IN WINNIPEG?

Positions of the Parties

RIL

[24] RIL argues that despite having sold the Carman Subdivision to CEMR, CN’s control over the operation of this line is such that it should be determined that CN is operating the railway and, as such, should be required to interswitch RIL’s traffic from the Mollard elevator.

[25] RIL states that the [REDACTED].

[26] RIL submits that [REDACTED]; however, RIL argues that [REDACTED].

[27] RIL refers to a letter sent by JRI to CN on [REDACTED] (letter). The letter outlines the terms of the agreement between JRI and CN in respect of the rail service to be provided to JRI at the Mollard elevator following the transfer of the Carman Subdivision to CEMR. RIL contends that [REDACTED].

[28] RIL submits that the agreements entered into between CEMR and CN reveal important operational integration, particularly with respect to RIL’s traffic from the Mollard elevator. RIL points to [REDACTED] that demonstrate that CN either controls, or retains the ability to control, operations along CEMR’s Carman line.

[29] Finally, RIL maintains that an entity that operates as a freight railway company cannot transport freight without obtaining and connecting railcars to locomotives. In this respect, RIL submits that CN retains the obligation to provide CEMR with locomotive power and engineering equipment pursuant to clause 1 of the letter, and railcars pursuant to the OMIA. RIL argues that these obligations are in place to allow CEMR to meet service obligations accepted by CN.

[30] RIL submits that without railcars supplied by CN, CEMR would not be able to operate the trains on the railway lines in a commercially viable manner. RIL contends that, as a consequence, CN must be considered to be doing an “act necessary for the operation” of the trains on the transferred lines by supplying the cars and by retaining the obligation to supply engines and engineering equipment as needed.

[31] RIL refers to the [REDACTED]:

[REDACTED]

[32] RIL concludes that all of these factors demonstrate that CN continues to operate the lines jointly with CEMR, and that it is therefore entitled to interswitching from the Mollard elevator.

CN

[33] CN submits that in [REDACTED] 1999, CN transferred, [REDACTED], the Carman Subdivision to CEMR, a wholly-owned subsidiary of Cando Contracting Ltd. (Cando) that was established in 1999 by Cando for the purpose of the acquisition of CN’s Pine Falls and Carman Subdivisions.

[34] CN submits that CEMR is an independent railway company that manages and operates the transferred lines on its own. CN contends that CEMR is an arm’s length entity and that the commercial relationship established by the agreements in 1999 has no effect on that fact.

[35] CN argues that the agreements cannot be interpreted as granting CN rights and interests sufficient to consider the Carman Subdivision as a “line of railway” for the purposes of interswitching. CN states that under the agreements, CN transferred all of its rail operations on the Carman Subdivision to CEMR.

[36] CN states that, pursuant to the agreements, [REDACTED]. According to CN, [REDACTED].

[37] CN also submits that [REDACTED].

[38] In addition, CN maintains that [REDACTED]..

[39] CN acknowledges that following the purchase of the Carman Subdivision, JRI sent a letter to CN outlining the terms of the agreement between JRI and CN respecting the rail service to be provided at the Mollard elevator following the transfer. CN states that [REDACTED].

[40] CN submits that [REDACTED].

[41] In addition, CN submits [REDACTED].

[42] CN submits that the [REDACTED] related to a complaint [REDACTED], the Agency established that a close functional relationship between two railway companies is not sufficient to make one company control the other. CN submits that [REDACTED].

[43] CN submits that in the [REDACTED]. Furthermore, CN contends that [REDACTED]. According to CN, this is also the case with CEMR.

[44] CN states that in light of the almost identical facts, the conclusions set forth by the Agency in [REDACTED] should be applied equally to the facts of the present case and lead the Agency to dismiss RIL’s application.

Analysis and Findings

[45] The first question to be determined is whether CN, as argued by RIL, continues to operate or control the Carman Subdivision. If the railway line has been sold pursuant to the CTA, then CN no longer has obligations under the CTA in respect of the operation of that railway line. If, on the other hand, there has been no transfer or if CN otherwise retained an operating interest in the railway line, and CN continues to operate the railway line, then any obligations imposed by the CTA with respect to the operation or control of the line would remain, the Agency would have jurisdiction over this line of railway, and interswitching may be available from the Mollard elevator.

[46] Subsection 146(2) of the CTA sets out that:

If the railway line, or any interest of the railway company in it, is sold, leased or otherwise transferred by an agreement entered into through the process set out in sections 143 to 145 or otherwise, the railway company that conveyed the railway line has no obligations under this Act in respect of the operation of the railway line as and from the date the sale, lease or other transfer was completed and has no obligations with respect to any operations by any public passenger service provider over the railway line as and from that date.

[47] The [REDACTED]:

[REDACTED]

[48] The [REDACTED], CN ceased to own the Carman Subdivision.

[49] Notwithstanding [REDACTED], CEMR and CN entered into agreements which created certain rights and obligations with respect to the Carman Subdivision.

[50] The [REDACTED]. Notably, CEMR did not grant CN any running rights over the Carman Subdivision.

[51] Pursuant to [REDACTED].

[52] [REDACTED].

[53] While CN [REDACTED].

[54] The nature of the relationship between CEMR and CN in this case is similar to the case in which the Agency issued [REDACTED]. In that case, [REDACTED]. All of these facts are present in this case.

[55] Based on the evidence, the Agency finds that CEMR is operating the Carman Subdivision, and not CN. The railway [REDACTED] CEMR and therefore CEMR acquired the rights to use the railway to operate trains for the purpose of providing rail freight transportation services to customers located on the lines, thereby [REDACTED]. While there were certain obligations imposed on each party, all rail operations were transferred to CEMR. The agreements in place represent a close functional relationship which is mutually beneficial to the parties. However, this relationship is not so close as to make CEMR an agent of CN, or sufficient to conclude that CN has maintained an operating interest in the Carman Subdivision.

[56] The Agency is of the opinion that CN does not have either direct ownership or corporate control over CEMR and that the Carman Subdivision is not owned, controlled, operated or leased by CN. Stated another way, the nature of the relationship between CN and CEMR does not change the fact that CEMR is a provincially-regulated railway company, operating within the province of Manitoba, and not subject to the jurisdiction of the Agency. The Agency finds that CN no longer has any obligations with respect to this line under the CTA, and that therefore RIL’s argument that CN should be required to interswitch its traffic from the Mollard elevator on this basis fails.

ISSUE 2: DOES SUBSECTION 128(4) OF THE CTA APPLY WITH RESPECT TO RIL’S MOLLARD ELEVATOR TRAFFIC?

Positions of the Parties

RIL’S APPLICATION

[57] RIL relies on subsection 128(4) of the CTA, which provides that the transfer of a railway line or the operating interest in a railway line pursuant to Division V of the CTA or section 158 of the National Transportation Act, 1987, R.S.C., 1985, c. 28 (3rd Supp.) (NTA) does not affect any entitlement to an interswitching rate.

[58] RIL also indicates that subsection 141(3) of the CTA, found in Division V, allows a railway company to sell, lease or otherwise transfer its railway lines, or its operating interest in its lines, for continued operation. RIL submits that CN transferred the operations of the Carman Subdivision to CEMR, pursuant to this section and, accordingly, argues that the transfer does not affect RIL’s entitlement to an interswitching rate from CN.

CN’S ANSWER

[59] CN submits that due to the location of the Mollard elevator, RIL is basing its application on the provisions of the Fair Rail for Grain Farmers Act, S.C. 2014, c. 8 (Bill C-30), which came into force in August 2014, and had the effect of extending interswitching distance limits to 160 km in parts of Canada.

[60] According to CN, RIL is claiming to be entitled to interswitching rates from the Mollard elevator because it is now located within a distance of 160 km, as if the provisions of Bill C-30 apply retroactively and to a facility located on a provincial railway line. CN contends that the new extended interswitching distance zone provisions of the Regulations cannot have such a retroactive effect.

[61] CN argues that in order for subsection 128(4) of the CTA to apply, the right to interswitching had to have existed at the moment the railway line was transferred, which is not the situation in the present case. CN submits that at the time of the transfer, the Mollard elevator was located outside of the 30 km statutory interswitching distance zone provided for in the CTA and in the Regulations.

[62] CN indicates that the legislative intent of subsection 128(4) of the CTA was to protect a shipper from losing the benefit of an existing right to interswitching at the time a federal railway line would become a provincial railway line, and that such a situation would have been unfair and detrimental to shippers who had selected the location of their elevators in consideration of an entitlement to interswitching rates. CN asserts that subsection 128(4) was created to protect shippers’ existing rights, not to create additional rights arising more than 15 years after the transfer of a railway line took place.

[63] CN submits that subsection 128(4) of the CTA could only apply in the event where RIL had an existing entitlement to interswitching at the moment of the transfer of the Carman Subdivision to CEMR, which was not the case. CN argues that a right cannot be “affected” by a transfer if such a right did not exist at that time. CN maintains that RIL was aware that the Mollard elevator would be located outside of the limit of 30 km provided for in section 127 of the CTA and in the Regulations when it was selecting the site, and it cannot argue now that it selected the location in consideration of an entitlement to an interswitching rate.

[64] Finally, CN submits that subsection 128(4) of the CTA is not available to RIL since section 87 of the CTA defines which points can be considered as “points of origin” or “points of destination” for the purpose of that provision. CN states that in accordance with the definitions under section 87, only mileage 0.13 of the Carman Subdivision (the point where the property line of CN ends and that of CEMR starts) near Carman Junction can be considered a “point of origin” or a “point of destination” under subsection 128(4) of the CTA. CN submits that, considering that the definition of points of origin or destination is exhaustive, the Mollard elevator cannot be read into that definition.

RIL’S REPLY

[65] RIL submits that it does not seek to apply the provisions of Bill C-30 or the amendments to the Regulations retroactively. RIL submits that the regulatory amendments providing for the new prescribed interswitching distance of 160 km, although undoubtedly affecting past transactions by virtue of subsection 128(4), operate prospectively from the time they took effect. RIL states that it is not seeking an order relating to interswitching as of a time prior to the enactment of Bill C-30 or the resulting amendments to the Regulations.

[66] RIL contends that the wording of subsection 128(4) of the CTA expressly refers to transfers of railway lines not only under Division V of Part III of the CTA, but also under section 158 of the NTA. RIL states that subsection 128(4) was first enacted as part of the CTA in 1996, and, while the NTA provided for regulated interswitching, it lacked any provision parallel to that of subsection 128(4).

[67] RIL also submits that it was only after the enactment of the CTA that the Regulations were amended to include points of origin and points of destination in the definition of “siding” for the purposes of regulated interswitching. RIL argues that as a result, when Parliament enacted subsection 128(4) as part of the CTA in 1996, the provision created access to regulated interswitching for certain shippers based on past transfers.

[68] RIL states that Parliament clearly intended subsection 128(4) of the CTA to provide for access to regulated interswitching based on transactions that occurred in the past. RIL argues that CN’s approach to subsection 128(4) leads to a result that Parliament could not possibly have intended.

[69] RIL points out that during the time period from the enactment of the NTA until today, the rates prescribed in the Regulations for Zones 1 through 4 have been amended at least twelve times. RIL submits that CN’s approach would preserve potentially all of the successive iterations of the Regulations and require a railway company to comply with different requirements, depending on the date on which a particular railway line was transferred for continued operation. RIL states that this would potentially lead to a multitude of different interswitching rates being applicable in circumstances that are essentially similar, simply on the basis of a different transfer date. RIL indicates that this is an absurd result and that CN’s interpretation of subsection 128(4) of the CTA should be rejected.

[70] Finally, RIL submits that had Parliament intended to freeze the rights of shippers as they existed at the date on which a railway company transfers a line under Division V of the CTA, it would have used clear and unambiguous language. RIL contends that Parliament did not do so, and the language required to limit the right to interswitching ought not to be read into subsection 128(4) of the CTA.

Analysis and Findings

[71] In Decision No. 35-R-2009, the Agency addressed Parliament’s intention in respect of the interswitching provisions as follows:

Interswitching of traffic between railway companies has existed in Canada since the early 1900’s. The concept of interswitching was introduced to limit the proliferation of railway lines in urban areas serving manufacturing-based industries. However, limiting the number of railway lines in an area could create a monopolistic service and rate situation. The ability to exchange or interswitch traffic with another railway company or companies within certain limits was seen as a means to reduce exclusive control over traffic.

The interswitching provisions of the CTA today are meant to provide shippers with greater access to competitive services at known prices to alternate rail carriers within interswitching limits. An interpretation of the relevant legislation should support this objective.

[72] Subsection 128(4) of the CTA provides for circumstances when a federally-regulated railway company transfers the operation of a railway line to a provincially-regulated railway company. In the absence of this provision, the CTA would no longer apply to the interswitching of traffic on this railway line and therefore interswitching would not be available to a shipper located on it. Subsection 128(4) preserves the entitlement to an interswitching rate despite the transfer. However, section 87 of the CTA clarifies that in these circumstances, while the entitlement to an interswitching rate may be preserved, the original “point of origin” of the traffic is not; the “point of origin” becomes the point where traffic is transferred to the line of a railway company to which Part III of the CTA applies from a line to which that Part does not apply. The reference to a railway line in section 87 to which Part III of the CTA does not apply further supports the view that the legislation contemplated a transfer of a federal railway line to a provincial railway company, and that the intent was to preserve an entitlement to an interswitching rate with respect to the federal railway.

[73] The issue in this case, however, is whether subsection 128(4) of the CTA operates to allow RIL to apply for an interswitching rate now, given that the Mollard elevator is within the prescribed distance of 160 kilometres, whereas it was not within the previously-prescribed distance of 30 kilometres at the time the railway line was transferred.

[74] The Agency accepts that the general rule is that statutes are not to be construed as having retrospective operation unless such a construction is expressly or by necessary implication required by the language of the Act (Gustavson Drilling (1964) Ltd. v. M.N.R, [1977] 1 S.C.R. 271).

[75] The CTA received royal assent on May 29, 1996. Subsection 128(4), which came into force when the CTA was enacted, specifically refers to transfers of railway lines not only under the CTA, but also to those transfers which took place previously under section 158 of the NTA:

For greater certainty, the transfer of a railway line, or the operating interest in a railway line, under Division V [of the CTA] or section 158 of the National Transportation Act, 1987 does not affect any entitlement to an interswitching rate. [emphasis added].

[76] The Agency is of the opinion that this clearly demonstrates that subsection 128(4) of the CTA applies not only to transfers that have taken place, or will take place, since the enactment of the provision in 1996, but also to transfers that took place prior to the enactment of the provision, during the time the NTA was in force. Therefore, subsection 128(4) is clearly meant to apply to past transactions. Neither party is suggesting that it is meant to operate retroactively in the sense that it alters rights as of a past time. What RIL is arguing is that subsection 128(4) of the CTA operates to grant a current right that would otherwise not be available due to the prior transfer of a railway line. The current right upon which RIL seeks to rely in this application is the right to interswitching that arises when section 128(4) of the CTA is read in conjunction with the extension of the interswitching limits as set out in the Regulations as amended effective August 1, 2014.

[77] Similarly, RIL is not proposing to apply the provisions of Bill C-30 retroactively. RIL does not argue that it was entitled to interswitching at the time of the transfer of the railway line by retroactive operation of Bill C-30. The Agency agrees with CN’s submission that the intent was not to create rights retroactively.

[78] CN argues that in order to take advantage of subsection 128(4) of the CTA, the right to interswitching must have existed at the time of the transfer. CN states that the legislative intent was to protect only those shippers who had a right to interswitching at the time of the transfer, although it provides no authority for this assertion. CN refers to the dictionary definitions of “affect” and “entitlement” to argue that there must be an existing right at the time of the transfer, but the definitions equally support the interpretation offered by RIL to the effect that the prior transfer does not affect a current entitlement.

[79] The Agency accepts RIL’s argument that if Parliament intended only to freeze and preserve interswitching rights which existed at the time of the transfer of the railway line, it could easily have done so. Parliament did not do this. On the contrary, the provision in question refers to “any” entitlement to an interswitching rate, and not “existing” entitlement. This supports the Agency’s view that subsection 128(4) was meant, among other things, to change the legal effect of past transactions prospectively.

[80] RIL does not argue that it selected the location of the Mollard elevator in reliance on having access to interswitching rates. The fact is that Bill C-30 expands the area within which interswitching is available in the province. The Mollard elevator is now within that area. The argument is that the transfer of the railway line does not affect whatever entitlement RIL might now have because of this expansion of prescribed interswitching limits.

[81] The Agency finds that the proper application of subsection 128(4) provides that a transfer of a railway line, or operating interest in it, does not affect any entitlement to an interswitching rate. Based on the above, the Agency finds that subsection 128(4) of the CTA is applicable in the present case, and that any entitlement that RIL might have to an interswitching rate today is not affected by the transfer of the Carman Subdivision to CEMR in 1999.

[82] The Agency further finds, pursuant to section 87 of the CTA, that the point of origin for the determination of the interswitching rate in respect RIL’s traffic from the Mollard elevator is at mileage 8.3 of CN’s Rivers Subdivision, where the traffic is transferred from the line of CEMR to the line of CN.

ISSUE 3: IS THE AGENCY SATISFIED THAT THE CONDITIONS FOR INTERSWITCHING TO BE ORDERED ARE MET, THAT IS, A RAILWAY LINE OF ONE FEDERALLY-REGULATED RAILWAY COMPANY CONNECTS WITH A RAILWAY LINE OF ANOTHER FEDERALLY-REGULATED RAILWAY COMPANY AND THE SHIPPER IS LOCATED WITHIN ONE OF THE PRESCRIBED ZONES FROM AN INTERCHANGE?

TEST FOR INTERSWITCHING

[83] Pursuant to section 127 of the CTA, in order for interswitching to be ordered by the Agency, three specific criteria must be met:

1. The line of one railway company must connect with the line of another railway company;
2. There is a place where rail cars may be stored; and
3. The point of origin or destination is within the prescribed distance of an interchange.

CRITERION 1: THE LINE OF ONE RAILWAY COMPANY MUST CONNECT WITH THE LINE OF ANOTHER RAILWAY COMPANY

[84] In order to meet Criterion 1, three sub-conditions must be met, that is:

1. There must be two railway companies within the meaning of the CTA;
2. The two railway companies must have a line of railway within the meaning of the CTA; and,
3. There must be a connection of the lines of the railway companies.

Positions of the parties

RIL’S APPLICATION

[85] RIL indicates that with the recent extension of the interswitching limits, its Mollard elevator, located approximately 50 km south-west of Winnipeg, is well within the prescribed interswitching limits of the CN-BNSF interchange in Winnipeg.

[86] RIL submits that Winnipeg is an interchange for the purposes of interswitching its traffic from the Mollard elevator and that the Agency has already conclusively determined in 35-R-2009">Decision No. 35-R-2009 (Fort Rouge Decision) that there is an interchange between CN and BNSF in Winnipeg. RIL points out that the Fort Rouge Decision was upheld by the Federal Court of Appeal in Canadian National Railway Company v. Canadian Transportation Agency, 2010 FCA 166.

[87] In respect of the first sub-condition of Criterion 1, RIL states that a “railway company”, as defined in section 87 of the CTA, includes a company that holds a certificate of fitness under section 92. RIL submits that both CN, authorised under Certificate of Fitness No. 97001-7, and BNSF, authorised under Certificate of Fitness No. 97015-6, are railway companies within the meaning of the CTA.

[88] With regard to the second sub-condition of Criterion 1, RIL submits that CN has extensive lines of railway throughout Winnipeg. In respect of BNSF, RIL states that it also has its own lines of railway in Winnipeg and sufficient interest in other trackage at the Fort Rouge yard to have a line of railway for the purposes of the interswitching provisions of the CTA.

[89] In respect of the third sub-condition of Criterion 1, RIL points to the Fort Rouge Decision, which sets out that the BNSF and CN lines of railway connect at mileage 4.5 of CN’s Rivers subdivision, approximately 1.91 mileages west of the Fort Rouge yard.

CN’S ANSWER

[90] CN submits that RIL’s application does not meet the first sub-condition that there be two railway companies within the meaning of the CTA. CN states that it is clear that a federally-regulated railway company within the meaning of the CTA is a railway company that meets one of the criteria mentioned above and which holds a valid certificate of fitness. CN states that CEMR is not a federally-regulated railway company and has no certificate of fitness issued by the Agency. It is therefore not a “railway company” within the meaning of the CTA.

[91] CN contends that this is fatal to RIL’s application as the Mollard elevator is located on a provincially-regulated railway line. The first condition established by the Agency for interswitching to be available is not met and the Agency should dismiss RIL’s application for this reason alone.

RIL’S REPLY

[92] RIL submits that nothing in its application contemplates regulated interswitching at a location where the lines of CEMR connect with the lines of a railway company subject to the CTA. RIL indicates that it seeks an order requiring CN to interchange RIL’s traffic with BNSF at the interchange between CN and BNSF at Winnipeg. RIL states that in the Fort Rouge Decision, the Agency found that there is such an interchange for the purpose of regulated interswitching.

Analysis and Findings

[93] There is no dispute as to whether CN and BNSF are railway companies within the meaning of the CTA. The Agency issued a certificate of fitness to CN to operate or construct railways in Canada. Similarly, the Agency issued a certificate of fitness to BNSF to operate a railway in the provinces of British Columbia and Manitoba. As both railway companies hold a certificate of fitness, pursuant to section 87 of the CTA, both are railway companies within the meaning of the CTA.

[94] CN’s argument is that CEMR is not a railway company within the meaning of the CTA. However, it is not CEMR which is the relevant party because it is not alleged that CEMR’s railway line connects with BNSF’s railway line. Furthermore, the fact that section 87 provides a specific definition for “point of origin” with respect to subsection 128(4) of the CTA further supports the view that consideration is not being given to CEMR or its railway line but that it is CN and BNSF which are the railway companies which are considered for the purposes of interswitching.

[95] In respect of the second and third sub-conditions of Criterion 1, the Agency has already determined in the Fort Rouge Decision that BNSF has a line of railway for the purposes of the interswitching provisions of the CTA, and that the BNSF and CN lines of railway connect at mileage 4.5 of CN’s Rivers subdivision, approximately 1.91 miles west of the Fort Rouge yard.

[96] Based on the foregoing, the Agency finds that all three sub-conditions of Criterion 1 are met; consequently, Criterion 1 is met. The Agency’s findings are consistent with the Fort Rouge Decision, namely that a line of railway operated by CN connects, in Winnipeg, with a line of railway operated by BNSF.

CRITERION 2: THERE IS A PLACE WHERE RAIL CARS MAY BE STORED

[97] The Agency determined in the Fort Rouge Decision that CN’s Fort Rouge Yard is a place where loaded or empty rail cars may be stored until delivered or received. CN does not dispute this. The Agency finds that, consistent with the Fort Rouge Decision, Criterion 2 is met.

CRITERION 3: THE POINT OF ORIGIN OR DESTINATION IS WITHIN THE PRESCRIBED DISTANCE OF AN INTERCHANGE

Positions of the Parties

RIL

[98] RIL indicates that the interchange location in Winnipeg is clearly within the prescribed interswitching distance in relation to the Mollard elevator. Pursuant to paragraph 7(2)(e) of the Regulations, the prescribed interswitching distance in Manitoba is 160 km. The Mollard elevator is located at a radial distance of approximately 50 km from the CN-BNSF interchange in Winnipeg.

CN

[99] CN states that the Mollard elevator was not located within a radius of 30 km of an interchange. CN argues that this is the area in which interswitching was available under subsection 127(3) of the CTA and the Regulations at the time when CN transferred the Carman Subdivision to CEMR, that is in 1999.

Analysis and findings

[100] The Agency determined in the Fort Rouge Decision that an interchange exists between BNSF and CN in Winnipeg for the purposes of interswitching pursuant to the CTA and the Regulations.

[101] Further, the Agency finds that the Mollard elevator is within the prescribed distance as it is located approximately 50 km from the CN-BNSF interchange in Winnipeg. CN does not dispute this fact but rather argues that RIL is not entitled to interswitching from this location because it was not within 30 km of the interchange when the railway line was transferred to CEMR. As has already been determined, it is the current prescribed interswitching distance that is relevant and RIL need not establish that it was within the prescribed distance at the time of the transfer. The transfer of the operation of the line of railway in 1999 from a federally-regulated railway company (CN) to a provincially-regulated railway company (CEMR), however, is relevant to the determination of the point of origin of the goods. Although the Mollard elevator is within the interswitching limits as amended effective August 1, 2014, the Mollard elevator is not the point of origin of the subject traffic for the purpose of the interswitching rate. Pursuant to subsection 87(4) of the CTA, the point of origin for the subject traffic is the point where the subject traffic is transferred from the line of CEMR to the line of CN.

[102] The Agency points out that at the time of the transfer, the Mollard elevator was not within the prescribed interswitching distance limits and would not have been eligible for interswitching rates. However, it is clear that had CN not sold the Carman Subdivision, the Mollard elevator would indisputably be eligible for interswitching rates as a result of the extended interswitching distance limits.

[103] The Agency therefore finds that Criterion 3 is met.

CONCLUSION

[104] In light of the above, the Agency finds that all of the criteria for interswitching are met. The Agency therefore orders CN, effective immediately, to provide interswitching for RIL’s traffic at the CN-BNSF interchange in Winnipeg, in accordance with the Regulations.

[105] Pursuant to section 87 of the CTA, the point of origin in respect of RIL’s traffic from the Mollard elevator is at mileage 8.3 of CN’s Rivers Subdivision, where the traffic is transferred from the line of CEMR to the line of CN.

This is a public redacted version of Confidential Decision No. CONF-4-2016 that issued on April 19, 2016 which cannot be made publicly available