Wednesday, March 11, 2009
North to Alaska: BC Rail as you may never have thought of it before. "A great longterm project, it'll change the face of the world!"
BC Rail In Depth Report
North to Alaska
Island Tides - November 28, 2004
When CN bought BC Rail from the provincial government, they not only achieved a monopoly on rail freight traffic for most of the interior of British Columbia, but also sewed up the two major route possibilities for a future railroad to Alaska. Given CN's ambitions for a railroad empire spanning all the North American Free Trade area, did they pay enough?
The CN purchase was announced on November 25, 2003 and completed on June14, 2004. On December 17, 2003, the BC Government released the final version of the Fairness Report," written by the consulting firm Charles River Associates (CRA) of Boston, Massachusetts ...
There are presently two railways in Alaska: the narrow-gauge White Pass and Yukon, from Skagway to Whitehorse, and the Alaska Railway, from Fairbanks to Anchorage.
CRA's report made no mention of possible future Alaska links, despite the fact that the idea (first floated in 1860, see box) has recently achieved significant momentum, as shown in the following quotes and events.
On December 11, 2000, US President Bill Clinton had signed the Rails to Resources Act of 2000. "The President is authorized and urged to enter into an agreement with the Government of Canada to establish an independent joint commission to study the feasibility and advisability of linking the rail system in Alaska to the nearest appropriate point on the North American continental rail system.
"There is authorized to be appropriated to any fund established for use by the Commission as described in subsection (a)(1) $6million to remain available until expended."
A Transport Canada "Issues Paper of 16 Mar 2001 stated: "The US Congress has allotted $6million to establish a bilateral commission to study the 2000 km rail link from Fort St John BC to Fairbanks Alaska ... The Yukon Government supports the rail project and [Alaska Senator] has met with Minister Collenette to discuss the project.
The paper projected a link from the Alaska Railway near Fairbanks to Prince George or to Fort St James on BC Rail's Dease Lake extension ...
Read more. Read how Prime Minister Paul Martin agreed to provide Canadian funding for the joint study. But how all those future business prospects were omitted from the CRA's assessment of BCRail's worth. Patrick Brown concludes with: "Thus, CN's purchase of BC Rail's freight operations, and its perpetual lease on the BC Railway Company's railbed to Fort Nelson and Dease Lake, effectively block all other railways' access to Alaska. This strategic advantage does not appear to have been valued adequately in CRA's analysis. Read Patrick Brown's full report with route map here.
Reprint from Volume 16 Number 22 Nov 18, 2004
© Island Tides Publishing Ltd.This article may be reproduced with this attribution, in its entirety, with noti¥cation to Island Tides Publishing Ltd. This article was published (November 18, 2004) in Island Tides. Island Tides is an independent, regional newspaper distributing 17,500 print copies throughout the Gulf Islands and the Canadian Strait of Georgia from Victoria to Campbell River to Howe Sound.
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Wonder what role, if any, Plant played in the BC Rail closed door 'fixings' including the musings about the future railway to Alaska?
Doesn't the Special Prosecutor on the BC Rail litigation, Bill Berardino originate from the same law firm that Plant was spawned from prior to his dubious poltical career? Any one know?
North to Alaska
SNIP to the important parts:
"Not Just a Branch Line
But CRA’s assessment of the railway’s worth was based almost completely on its present business rather than its future potential. It made the case that almost all of BC Rail’s customers sell their products outside the province. But according to the Fairness Report, the majority of 2002 BC Rail freight traffic (60%) remained on the BC Rail network; 37% was forwarded to other railroads, and only 3% of traffic originated on a different railroad and terminated on BC Rail.
According to the report, BC Rail forwarded traffic went mainly to Ontario and California; Quebec
and Washington; Alberta, Oregon,
New Mexico, Illinois, and Texas.
CRA, after an extensive analysis of
specific destinations, concluded
that despite CN’s domination of
connections, BC Rail customers
would still have competitive
access to these varied markets.
However, CRA paid no attention to the importance of BC Rail to the long-term strategy of CN. CN is no longer just a Canadian railway, but in its expansion into the United States, has clearly indicated its ambitions to connect all the seaboards of North America. The BC Rail network clearly points to a future connection with Alaska, and as such is of far greater strategic importance to CN than just as a branch railway."
The Wisconsin Central (WC) deal represented the purchase, according to CRA, of a reasonably profitable railway with a good ‘strategic fit’ with the combined CN/IC network, but not one
of great strategic importance by itself. CN paid $1.2 billion for WC or 2.3 times its revenues of $548 million.
This was an apparent premium of $500 million for its ‘strategic fit’. Based on this analysis, CRA concluded that CN’s offer for BC Rail of $750 million, or 2.6 times its present revenues of $293 million, was fair. But neither
IC nor WC, both mature railroads, would appear to have the potential for geographical expansion that BC Rail has.
Thus CN’s purchase of BC Rail’s freight operations, and its
perpetual lease on the BC Railway Company’s railbed to Fort Nelson and Dease Lake, effectively block all other railways’ access to Alaska. This strategic advantage does not appear to have been valued adequately in CRA’s comparative analysis.
CN could afford it. Its profit for the most recent years has
ranged between $800 million and $1 billion US."