Saturday, September 12, 2009

 

Why did we sell our railway? Look back ...

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The date was November 14, 2003 and Chris Tenove in The Tyee asked:

Why Are We Selling Our Railway?

Reports that BC Rail will be sold this week to Canadian National Railway (floated in Friday's Vancouver Sun and quickly denied by the government) left the province's citizens - including the 32,000 who signed a petition against the move - with more questions than answers. Find here a quick briefing on issues.

Is BC Rail being being privatized?

The government says no, that the sale of BC Rail operations is merely a public-private partnership. But for most of us, when a private company is running the show we consider it "privatized."

The provincial government assessed bids from Canadian National, Canadian Pacific, and a joint bid by OmniTRAX and Burlington Northern Sante Fe and news reports suggest the CN bid will win. The province will not sell the railbeds, tracks, or rights-of-way, but everything else goes. The initial deal is expected to last for 30 years.

Why does the government want to privatize BC Rail?

Gordon Campbell argues that government should get out of areas where private industry can effectively operate, because the marketplace will ensure maximum efficiency. Yet many British Columbians don't think this logic should be applied to cherished provincial assets such as BC Hydro, the Coquihalla Highway, or BC Rail. As a result, after their 1996 election loss and before the 2001 elections, the Liberals announced that they would not privatize or sell BC Hydro and BC Rail.

Some argue the Liberals see privatization as a remedy for the provincial budget woes, caused by the sluggish BC economy and the big tax cut just after the last election. The Liberals promised a balanced budget by 2004-5, and must find money everywhere they can. Finance Minister Gary Collins insists the books will be balanced regardless of what happens with BC Rail.


Does anyone else want BC Rail privatized?

Nearly three-quarters of BC Rail revenue comes from the forest industry, which wants to protect the cheap, reliable service that BC Rail can provide. Of course, this is what everyone wants.

The Western Canadian Shippers' Coalition, which represents the forest industry's major players, says BC Rail is hampered by a mountain of debt -- nearly $500 million, which puts debt servicing costs of $30 million a year. They fear this will prevent BC Rail from making the kind of capital investments needed to run a competitive, modern railway. But they also fear that an international player like CN won't be attentive to the specific needs of B.C. producers.

But BC Rail is profitable, isn't it?

Last year the railway posted an operating profit of more than $75 million, and were able to pay down some of their debt. By the end of the third quarter of 2003, BC Rail's operating profit was already at $70.5 million.

BC Rail has cut operating costs (and more than 500 jobs) and increased revenue from the forest industry. In order to turn a profit despite U.S. anti-dumping duties, forest companies have boosted shipments. Output will likely decrease once an agreement is struck on the softwood lumber dispute. On the other hand, there will be a lot of pine beetle-damaged wood to ship in future, and BC Rail might find other ways to increase revenue.

Without access to BC Rail's confidential financial assessments, it's difficult to say whether the railway will turn a profit in the near future. Perhaps the strongest argument that it will, however, is that companies lined up to take it over.

Aren't there larger issues than profitability? Isn't BC Rail intended to stimulate economic development?

Yes. BC Rail built a line to Tumbler Ridge to ship coal to Japan. The railway lost money because of the huge capital investment, but the venture made sense when you include provincial taxes generated by the development of the coal industry. In the future, a rail line to Alaska or spur lines into oil and gas fields might be desirable. Would a private operator be interested? What kinds of subsidies would be required?

Will private operators cut existing BC Rail jobs?

Yes. It doesn't make sense for a railway company to take on BC Rail without maximizing efficiencies, and that will mean cutting redundant positions. One indication of what may be in store was a leaked memo to BC Rail management in 2002. It estimated that under CN, more than two-thirds of jobs could be cut. That estimate might be high, because they were looking at the impact of the outright sale of BC Rail and not just a 30-year partnership. The B.C. government may have negotiated some protection for BC Rail jobs. But there is little doubt that there will be cuts.

Bob Sharpe, chair of the Council of Trade Unions on BC Rail, has estimated that a CN deal could cost half of BC Rail's 1,600 jobs.

Wouldn't CN have a virtual monopoly on rail transport in most of B.C.? Isn't a monopoly the antithesis of the competitive environment the Liberals say they are seeking through privatization?

Good questions.

Call me a cynic, but have the railway companies made contributions to the Liberal party?

Since 1996, CN has given the Liberals $126,000 and CP has given them $80,000, according to the B.C. Federation of Labour, while OmniTRAX and Burlington Northern Sante Fe have given nothing.

Are there any advantages to having a private operator take over BC Rail?

This question is difficult to answer. Of course, new management could come up with new innovations. A larger company could get better deals when transferring freight between the BC Rail lines and lines owned by other companies. A new operator might improve communication technology or buy new rail cars. CN has become a stronger company in recent years through improved performance in on-time delivery. There are lots of possibilities, but no guarantees.

BC Rail eliminated its passenger service in the fall of 2002, isolating small, remote communities and leaving towns as big as Lillooet with no public transport. Is there any chance that privatization will lead to passenger service?

The provincial government said bids must include access to rail lines by third-party passenger train operators. Tour operators such as Rocky Mountaineer Railtours and Whistler Rail Tours have both expressed an interest in a tourist service on BC Rail lines. But basic passenger rail service almost always requires some form of subsidy.


Links:
BC Rail
Council of Trade Unions on BC Rail
BC Department of Transportation

ctenove@yahoo.com

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Comments:
For instance, as a provincially owned company, BC Rail was not subject to Federal laws, but with the Federal government's rewriting of the Railway Act it was able to sell off OUR Canadian National Railway to a private company CN Rail (CN no longer stands for Canadian National...it just means CN is CN).

Hmmmmm. As long as BC Rail was owned by the Province of British Columbia the rail company was not subject to Federal laws pertaining to the Railway Act in Ottawa. The moment the Railway Act was changed to allow the Federal government to sell off Canadian National Railway, to a majority of American shareholders, the incentive of CNR has become one in which it wants to control all North America, to virtually wipe out its competition.

When Gordon Campbell decided to sell off BC Rail, or maybe he was kick started by a major player in CNR who just happened to have a consultant working in the Premier's Office and who had acted as the BC Liberals campaign go-to person for two terms... both being major contributors to the BC Liberals coffers, is it any wonder that BC Rail was sold off.

The moment that CNR took possession of the BC Rail, it immediately applied to the CTA to have the laws regarding how it operates its railway in the rest of Canada applied to that of British Columbia, seeing as how it was on a long term lease with a single shareholder.


Canadian National Railway's acquisition of BC Rail, the third largest railway in Canada, which put that former provincial railway, with its 2,300 kilometres of track, under the Agency''s jurisdiction
Source: http://www.cta-otc.gc.ca/doc.php?sid=31&lang=eng
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BC has become the Banana republic of North America. defined:(a small country (especially in Central America) that is politically unstable and whose economy is dominated by foreign companies and depends on one export (such as bananas))

You can see the similarities here in BC with that of Guatemala when in 1904 dictator Maunuel Estrada Cabrera grants United Fruit a ninety-nine year concession to construct and maintain the country's main rail line from Guatemala City to Puerto Barrios. - Source: http://www.unitedfruit.org/chron.htm

Happy times were just around the corner for Guatamalans when the rail line reverted back to the country, but pity poor us here in BC when you realize in that same glorious year of 2003....the BC Liberals made their deal of a century with the same devils also linked by rail.

We ARE politically unstable and our economy is dominated by foreign companies and depends on one export (such as bananas), in our case its sell everything we own outright, and buy something that our children and grandchildren will be rquired to pay via tolls on bridges, tunnels, and highways via PPP.

At the Tyee there is a great backgrounder to British Columbia's two time rise in debt with each successive government blaming their immdediate predecessor for the problems. Source:http://thetyee.ca/Views/2004/08/09/BCDebt/

SNIP ................"W.A.C. Bennett's hucksterism

Seven years after taking office, premier W.A.C. Bennett held a well-publicized bond-burning ceremony on Lake Okanagan at Kelowna to celebrate B.C.'s freedom from debt. The festivities were a sham, however; Bennett merely had shifted Victoria's financial obligations to newly-created Crown corporations and other government agencies as 'contingent liabilities.'
" SNIP

The BC Liberals have taken us from $34 billion to a staggering $60 billion. Banana Republic!!! I thought the Late Ernie Crist was wrong when he called the District of North Vancouver a Banana Republic, too bad he couldn't be here now to see what a real Banana Republic looks like.

The problem with doubling reminds me of the mathematical problem of counting Canadian Wheat on a chess board by doubling the previous square.... the Answer is $18,446,744,073,709,551,615 by the time our children children children children reach the 64th Square of a Democratically elected government of British Columbia.

Source: http://en.wikipedia.org/wiki/Wheat_and_chessboard_problem
 
By way of a comparison to the 18,446,744,073,709,551,615 contents on the 64th square, by doubling, a Googol is 1, with 100 zero 1,000,000,000,000,000,000,000,000,00..... etc

The funny part is when using these keywords on Google: "How much is a google" the answer pops up on Yahoo!

Source: http://www.google.ca/#hl=en&source=hp&q=how+much+is+a+google&btnG=Google+Search&meta=&aq=f&oq=&fp=b89dc01650a86922


So things are not as quite as bad as it seems.
 
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