3. Rail transportation

3.1 Certificate of Fitness and insurance monitoring

Certificates

Any person wanting to construct or operate a federal freight or passenger railway must apply to the CTA for a Certificate of Fitness (licence). While some additional scenarios apply, in general, a federal railway is one that operates across borders (provincial/ territorial or international).

The CTA issues the certificate if it is satisfied that the railway falls under federal jurisdiction and meets relevant insurance requirements. For freight railways, this means having certain levels of liability insurance, based on the volume of the prescribed goods the railway company is authorized to carry in a calendar year, as defined under “Class of Railway Operations” in Schedule IV of the Act. The minimums are higher for railways carrying crude oil or toxic inhalation hazards, such as chlorine or ammonia as defined in section 2 of the Transportation of Dangerous Goods Act, 1992.

Monitoring

The CTA monitors railways’ insurance coverage to ensure they are maintaining the levels required for their certificate and can suspend or cancel certificates in cases where a railway’s insurance coverage is no longer adequate. As with any breach of the Act, this is also an offence that can be subject to prosecution and fines.

The CTA maintains a list on its website of all federal railways and the status of their Certificate of Fitness (CoF). This status is also of interest to Transport Canada (TC), as railways with active certificates are also subject to the Railway Safety Act and certain related regulations that TC administers.

3.2 Section 98 – Approval to construct a railway line

As per section 98 of the Act, any federal railway company that wants to construct a railway line must first obtain approval from the CTA. The CTA may approve the construction if it finds that the location of the line is reasonable. In making this determination, the CTA must consider the railway’s operational and service requirements as well as the interests of localities that will be affected by the railway line.

If any part of the proposed line is on federal land, the CTA must also consider its potential effects on the environment, as set out in the Impact Assessment Act.

Before submitting a construction application to the CTA, a railway must carry out several preparatory activities, including identifying and meaningfully consulting with localities and Indigenous communities that could be affected by the line.

Once the CTA receives the application, it carries out a four-stage review:

• Assessing the application for completeness;
• A public comment process;
• Deliberations; and
• The determination (including conditions on the approval, as relevant).

The CTA aims to issue such determinations within 85 business days after the public comment period closes.

Section 98 applications currently before the CTA (as of April 2026):

• Lac-Mégantic bypass (CPKC)
• Vancouver Logistics Park (Pitt Meadows) (CPKC)
• Cranberry bypass (CN)

Bill C-15 states that construction of railway lines that are to be part of the high-speed rail network is deemed approved by the CTA under section 98 of the Act.

3.3 Net Salvage Value determinations

The Act establishes a framework for railway companies under federal jurisdiction to transfer or discontinue railway lines, as well as the dismantling of certain sidings and spurs in metropolitan areas. At specific points within these legislated processes, the CTA may be called upon to determine the Net Salvage Value (NSV) of railway assets, with a view to facilitating their orderly transfer or disposition.

Although the Act does not explicitly define NSV, various CTA decisions have interpreted it as the market value of railway assets minus the costs associated with their disposal. These costs may include, but are not limited to, track removal, asset disposal, environmental remediation, and related expenses.

The nature of the determination (binding or non‑binding) and cost recovery requirements are governed by the specific legislative provision invoked.

There is one NSV application currently before the CTA as of April 2026: Ministère des Transports et de la Mobilité durable v. Canadian Pacific Kansas City (Case No. 25-20312)

3.4 Moving Western grain (MRE and VRCPI)

Maximum Revenue Entitlement (MRE)

The CTA manages a Maximum Revenue Entitlement (MRE) Program for the movement of Western grain by rail. The program applies to the Canadian National and Canadian Pacific Kansas City Railway Companies (CN and CPKC). It ensures the railways are compensated fairly for the grain they transport, while also providing grain shippers price protections. This helps ensure the efficient movement of grain to Western ports for export, which has long been a critical economic consideration for Canada.

Under the MRE program:

• The total yearly revenue CN and CPKC can earn for transporting Western grain is limited, with the maximum amount for each railway calculated by the CTA.
• Western grain means most grains grown in, or imported into, Western Canada, generally defined as west of Thunder Bay and Armstrong, Ontario. Some exceptions apply.
• If CN or CPKC revenues go above their MRE, they must pay the excess amount, plus a penalty. The money goes to the Western Grains Research Foundations that fund research helping Prairie farmers.

Volume-Related Composite Price Indices (VRCPI)

The Volume-Related Composite Price Indices (VRCPI) is an inflation index used in calculating the MRE. It ensures that the MRE accounts for the price changes CN and CPKC have experienced since 2000-2001 for goods and services such as labour, fuel, material and capital purchases. It also takes into account some costs that are specific to grain transportation, like the cost to buy and maintain hopper cars.

The CTA sets one VRCPI for CN and one for CPKC. These are published on April 30 of each year, leaving time for the railways to ready their freight rates and pricing strategies before the start of the crop year on August 1.

3.5 Interswitching

Interswitching is the mandatory transfer of traffic between two railway companies under regulated rates. One railway takes a shipper’s freight part of the way between origin and destination, then transfers the freight to a competing railway with which the shipper has made arrangements for the rest of the haul. The transfer takes place at an interchange – where the lines of the two railways connect.

The CTA regulates some interswitching to ensure shippers have fair and reasonable access to service from more than one railway, which can increase competition in the system. In particular, the CTA is responsible for:

• Issuing an annual decision that sets the rates for “30-kilometre interswitching”. This is interswitching for shippers whose siding/facility at origin or destination is within 30 kilometres (in a straight line) of an interchange, or is “reasonably close” to an interchange, as decided by the CTA;
• Making rules for 30-kilometre interswitching in the Railway Interswitching Regulations. This includes rules defining different zones within the 30-kilometre distance around the interchange and setting out the level of service railways should provide for interswitching traffic;
• Reviewing the Railway Interswitching Regulations once every five years (under this schedule, the next review will be launched in 2029);
• Resolving disputes about interswitching brought to the CTA by shippers or others; and
• Regulating Long-Haul Interswitching, which is not limited to 30 kilometres, although other conditions apply.

3.6 Rail dispute resolution

Rail dispute resolution services

The CTA offers the following four types of services for resolving rail disputes.

• Rail Help Line: The CTA maintains a Help Line for railways, shippers, and communities to answer their questions about their rights and obligations and to help them understand whether they have an issue that could, if needed, be brought to the CTA for resolution.
• Mediation: A CTA mediator helps the parties resolve their differences through negotiation of a confidential settlement agreement. Mediation sessions take place either face-to-face or by teleconference. The resulting agreement can be filed with, and enforced by, the CTA.
• Adjudication: A panel of one or more CTA Members considers written arguments and evidence from each party and issues a legally binding decision on the matter. This is made public.
• Arbitration: An arbitrator reviews the facts (or final offers) submitted by the parties and makes a legally binding, confidential decision.

Most common rail disputes brought to the CTA

The most common rail disputes the CTA resolves are the following:

• Level of service complaints: These complaints concern whether the railway is providing “adequate and suitable” service for loading, receiving, carrying, delivering, and unloading the shipper’s traffic. Under the Act, the service must be adequate and suitable. If the railway and shipper have tried, but been unable, to negotiate a formal level of service agreement, the CTA can also resolve that dispute by establishing the agreement using arbitration.
• Noise and vibration complaints: These complaints concern noise and vibration caused by the construction or operation of federal freight and passenger railways and urban transit. Those with a complaint must try to resolve it with the railway before coming to the CTA and may make use of our guide to resolving noise and vibration complaints.
• Crossing complaints: The CTA can help resolve disputes between railway companies and those who have, or want, a railway crossing. This includes municipal governments and other road authorities concerned with road crossings, landowners who need to cross the railway line to access their property, and utility companies who want to install or modify a utility crossing (for wires, cables, pipelines, and similar). In any dispute, parties can ask the CTA to apportion the costs of the crossing project.
• Line transfer and discontinuance: A railway company must take certain steps before transferring or discontinuing a line. These include providing one year’s notice of its intent (this must appear in its three-year plan), advertising the line as available and negotiating with interested parties, and offering to transfer the line to the federal government, provincial governments, and urban transit authorities. In a dispute, either party can apply to the CTA. The CTA can, as needed, ensure compliance with the steps, ensure the railway negotiates in good faith with interested parties, and make determinations about the net salvage value of an affected line and whether particular trackage is captured by the process.
• 30-kilometre interswitching: Shippers or others in an interswitching dispute with a railway can apply for CTA services. The CTA resolves issues such as whether the right rate was charged; whether a siding/facility is within 30 kilometres of, or reasonably close to, an interchange; and whether an interchange exists.
• Public passenger service providers: These complaints concern a public passenger service provider (PPSP) and a railway company that are unable to agree in respect of any matter raised in the context of the negotiation of any agreement concerning the use of the railway company’s railway, land, equipment, facilities or services by the PPSP or concerning the conditions, or the amount to be paid, for that use, the PPSP may, after reasonable efforts to resolve the matter have been made, apply to the CTA to decide the matter. A PPSP and a railway company that are unable to agree in respect of any matter raised in the context of the implementation of any matter previously decided by the CTA, either the PPSP or the railway company may, after reasonable efforts to resolve the matter have been made, apply to the CTA to decide the matter. The CTA may determine the amount to be paid by the PPSP for the use of any of the railway company's railway, land, equipment, facilities or services.

Other rail and marine disputes

The CTA can also resolve certain other rail disputes, though these are brought very rarely. They include disputes about running rights (where one railway company wants to operate on another’s rail line), line relocation in urban areas, and work done by railway companies for safety reasons.

The CTA can resolve disputes related to marine transportation. Although these are not very common, they include disputes about pilotage authority charges, port authority fees, unreasonable price increases or reductions in service by a shipping conference, and disputes related to fees charged by the St. Lawrence Seaway Management Corporation, the Federal Bridge Corporation Ltd., or the Seaway International Bridge Corporation Ltd.

3.7 Current rail transportation issues

Issue 1: Rail line construction approvals - Streamlining

Background information

The CTA is improving its process for reviewing and approving railway construction applications under section 98 of the Act. The goal is to increase efficiency and reduce regulatory burden by introducing an approach proportional to the complexity and risk (low, medium, and high) of the proposed projects. This will focus efforts on the process status and, on the issues and impacts that matter most, while maintaining rigor and transparency. It will make the approvals process faster, clearer, and more predictable.

The existing guide for railways on applying under section 98 will be updated to reflect the new approach. A new Indigenous consultation guide will accompany this guide.

Next steps

A Program Policy Statement and work plan for this initiative were developed in Winter 2026. Building on these foundations, upcoming steps include stakeholder consultations on the guidance updates. Subsequently, drafting revised guidelines and templates will continue, with publication expected in March 2027.

Issue 2: Interswitching – Rates review and consultation

Background information

The CTA recently concluded a public consultation on the way it sets 30-kilometre interswitching rates – in particular, which commercial market factors the CTA should consider and how those factors should be weighed.

This activity follows from a 2025 Federal Court of Appeal decision allowing CN to appeal the CTA’s 2024 interswitching rates determination. The FCA set the determination aside and sent the matter back to the CTA.

Next steps

The consultation is currently ongoing. CTA rail experts will review the feedback, which will help the CTA decide how to incorporate the Court’s interpretation when it redetermines the interswitching rates for 2024, 2025, and 2026 and sets future rates.

Issue 3: VRCPI – Court finding

Background information

In December 2025, the Federal Court of Appeal rejected a CN challenge to the CTA’s methodology for setting the VRCPI (index). The CTA uses this index when it calculates MREs for moving grain by rail. The challenge concerned the way the CTA accounts for forecast variances.

The Court confirmed that forecasting variances are an inherent feature of the methodology and that the CTA had properly exercised its discretion in this regard.

As a result, the CTA will continue using its established VRCPI methodology. At the same time, it will look for opportunities to further enhance the effectiveness of its forecasting models based on stakeholder feedback.

Next steps

The CTA held a public consultation on its models earlier in 2025 and continues to examine the feedback.

Key issue 4: Continued application of the new risk-based methodology for assessing the adequacy of passenger railway third-party liability insurance

Background information

In 2025, the CTA completed insurance adequacy re-assessments on all six passenger railway CoF holders, applying a new risk-based and data-driven methodology. This new methodology leverages risk factor and actuarial data from the railways to establish risk scores and ranges of insurance levels that would cover estimated losses in the event of an accident.

Next steps

Building off the successful initial implementation of the new methodology, existing CoF-holders will now be re-assessed every five years, and new passenger railway CoF applicants will be assessed under the new methodology. Further, in 2026, the methodology and process will be documented in a new Standard Operating Procedure to include relevant work tools and templates.

Issue 5: Lac-Mégantic rail bypass project

Background information

In 2018, the Prime Minister of Canada and Premier of Quebec announced funding for a 12.5 km rail bypass project that will avoid downtown Lac-Mégantic. The project will be managed, and the bypass will be owned, by CPKC.

On September 19, 2025, CPKC filed its final application to the CTA for the proposed railway bypass. The CTA held a public comment period from November 12, 2025, to January 30, 2026, and received over 120 submissions.

Next steps

Input is currently being reviewed by the CTA, and a determination is expected to be made in the 2026-27 fiscal year.