CN ANNOUNCES PARTNERSHIP WITH BC RAIL
Partnership will benefit province's forest products industry, ensure effective rail competition and promote economic development of B.C.'s North
[CN, 11-25-03]
VANCOUVER, B.C., Nov. 25, 2003 - CN announced today it will pay the B.C. government $1-billion in cash to acquire the outstanding shares of BC Rail Ltd., along with the right to operate over BC Rail's roadbed under a long-term lease. BC Rail's rail bed will remain in public hands, with CN assuming responsibility for rail transportation and infrastructure maintenance.
E. Hunter Harrison, president and chief executive officer of CN, said: "CN is pleased that the B.C. government has selected us to partner with BC Rail. Our financial strength, operating excellence, and investment in the future of BC Rail will create lasting economic value for all of B.C.
"Purchasing the BC Rail franchise is a strategically important initiative for CN, one that will strengthen our forest products business and that has significant scope for shareholder value creation.
"We firmly believe our plan for BC Rail will best serve the province's forest products industry, northern communities and vital tourism trade. The rail combination will offer BC Rail shippers unparalleled routes to major NAFTA and international markets a new network of routes that will strengthen the competitiveness of the B.C. economy.
"Our partnership with B.C. also reflects CN's commitment to promote open and fair competition and to share the transaction's synergies with shippers. We will offer BC Rail's shippers the 'best of both worlds' - the efficiencies and route advantages of CN's single line-service to key markets, and the option of routing traffic to other railways at the Vancouver gateway at lower average rates than those now charged by BC Rail."
Harrison said: "Another key objective of our partnership is economic and community development in B.C.'s North. First, we will locate our B.C. North Division office in Prince George and inject new work into the city's BC Rail shop complex. These initiatives will assure local decision-making and a highly responsive work force to meet the needs of BC Rail shippers, and help mitigate the employment impact of new rail efficiencies. Second, CN is committed to grow freight volumes in the Northwest Corridor in cooperation with the Port of Prince Rupert. And third, we will actively support the introduction of new and exciting train tours over BC Rail between Vancouver, Whistler and the B.C. North. CN and BC Rail will soon request proposals from qualified companies to select third party operators for these trains."
CN plans to invest one million dollars in a new state-of-the-art wheel shop at BC Rail's Prince George Shop complex, and will in-source wheel work currently contracted out and assign CN system freight car and locomotive work to the facility.
Harrison also said: "CN has extensive experience in working with Aboriginal groups, supports the treaty process and will respect existing agreements and protocols with BC Rail."
The integration of CN and BC Rail operations will be conducted in step-by-step fashion over a three-year period, ensuring a smooth transition for shippers and fair treatment of employees.
Excluding 115 employees who are already inactive, BC Rail currently has a workforce of 1,380 employees. CN's operating plan in future will require a workforce of 950, including 95 employees who would be surplus were it not for the company's plan to perform new mechanical work at BC Rail's Prince George shops, and 60 employees to be relocated within CN's system in Western Canada. CN estimates 250 BC Rail employees are eligible for early retirement, and that the remaining 180 job reductions will be accomplished by attrition or severance.
"We will do our utmost to work with BC Rail communities to pursue growth opportunities and to find creative ways to lessen the impact of our operating plan on employment levels," said Harrison.
CN expects the combined CN/BC Rail networks to generate revenue gains from market share captured from trucks, and to produce cost synergies from new operating efficiencies and greater asset utilization. CN will finance the transaction with debt and expects it to be accretive to its earnings per share and free cash flow in the first year of BC Rail operation.
Harrison said: "CN is a shareholder focused company. Since the company's initial public offering in November 1995, CN's share price has grown by almost 500 per cent.
"CN has a record of flawlessly bringing other railroads into its system. This success has delivered real benefits to shippers, shareholders and employees. We expect nothing less in the integration of BC Rail into CN's network."
The B.C. government will enact legislation to effect the partnership with CN. The transaction is subject to approval by Canada's Competition Bureau and is expected to close in the first quarter of 2004.
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CANADIAN NATIONAL TO PURCHASE BC RAIL
CN adds to acquisition roster by bagging BC Rail bid
[ProgressiveRailroading.com, 11-26-03]
As had been widely speculated, the winning bidder for BC Rail Ltd. is the Class I that's been the most active in the railroad acquisition market for the past few years: Canadian National Railway Co.
On November 25, the province of British Columbia announced it chose CN to enter into a "BC Rail Investment Partnership" under which the railroad will pay British Columbia $768-million in cash to acquire the 1,400-mile regional's outstanding shares and the right to operate over BC Rail's roadbed under a long-term lease. The regional's rail bed will remain in public hands, with CN assuming responsibility for rail transportation and infrastructure maintenance.
The province selected CN's bid over those submitted by Canadian Pacific Railway and a Burlington Northern Santa Fe/OmniTRAX Inc. joint venture because of CN's north/south network and deep pockets.
"CN set itself apart from the other proponents with its capacity to re-invest in the railway and to link shippers with markets across North America," said Transportation Minister Judith Reid in a prepared statement.
CN plans to spend $1-million to build a state-of-the-art wheel shop at BC Rail's Prince George, B.C., shop complex to in-source wheel work currently contracted out, and assign CN system rail-car and locomotive work to the facility. CN also expects to locate a new B.C. North Division office in Prince George and move most of its switching activities from its downtown yard to BC Rail's yard to free up land for potential commercial, light industrial and recreational development.
"Purchasing the BC Rail franchise is a strategically important initiative for CN, one that will strengthen our forest products business and that has significant scope for shareholder value creation," said CN President and Chief Executive Officer E. Hunter Harrison. "The rail combination will offer BC Rail shippers unparalleled routes to major NAFTA and international markets - a new network of routes that will strengthen the competitiveness of the B.C. economy."
CN plans to add 600 new rail cars to BC Rail's fleet, and provide interline shippers an average seven percent rate reduction and 30 percent faster transit times from Prince George to Vancouver. In the first quarter, the partnership also expects to introduce "Chicago Express," a service offering Prince George-to-Chicago moves two days faster compared with current service.
In addition, the partners plan to establish an "Open Gateway Rate and Service Commitment" to maintain access for shippers to competing railroads at Vancouver, continue D'Arcy to Lillooet and Takla shuttle services, and reopen the Dawson Creek-to-Hythe line to facilitate grain handling from the Peace region. The province will provide $17.2 million to help expand the Port of Prince Rupert, including construction of container terminal facilities, and CN will invest up to $15-million in new rail infrastructure to help support the port expansion.
The integration of CN's and BC Rail's operations will be conducted during the next three years to ensure a smooth transition for shippers and fair treatment of employees, CN officials said.
Although Council of Trade Unions on BC Rail - which strongly opposed the sale - projected the transaction would lead to major job losses, CN estimates its operating plan will affect 430 BC Rail employees province-wide during the next three years. About 250 employees will be eligible for early retirement, resulting in 180 involuntary departures to be achieved through attrition or severance, CN officials said, adding that 25 rail jobs will be affected.
"We will do our utmost to work with BC Rail communities to pursue growth opportunities and to find creative ways to lessen the impact of our operating plan on employment levels," said Harrison.
BC Rail is the third regional CN has acquired during the past five years, following purchases of Illinois Central Railroad in 1998 and Wisconsin Central Ltd. in 2001. CN also recently acquired Great Lakes Transportation L.L.C.'s assets, which include two short lines and a switching road.
"CN has a record of flawlessly bringing other railroads into its system," said Harrison. "This success has delivered real benefits to shippers, shareholders and employees, [and] we expect nothing less in the integration of BC Rail into CN's network."
[ProgressiveRailroading.com, 11-26-03]
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CANADIAN NATIONAL CONTINUES EXPANSION, BUYING BC RAIL FOR $1-BILLION
[Canadian Press, 11-25-03, by Allan Swift]
The $1 billion cash purchase of B.C. Rail by Canadian National Railway Co. continues the Montreal company's rapid North American expansion and is the second deal in recent weeks in which Canada's biggest rail operator is boosting its presence in the resources sector.
Canadian National said Tuesday's strategic deal will expand its western operations, strengthen CN's forest products business and help the company lure shipping traffic away from the trucking sector through lower rates and faster shipping times.
Chief executive Hunter Harrison said he expects B.C. Rail will add to CN's profits in the first year of operation.
"CN has a record of flawlessly bringing other railroads into its system," said Harrison. "We expect nothing less in the integration of BC Rail into CN's network."
A Toronto analyst, who asked not to be named, said he believes Harrison when he says the B.C. Rail acquisition will add to earnings the first year, given CN's recent history in rail integrations.
"CN is already one of the largest transport companies in the pulp and paper business and this would fit well within their business," said the analyst.
CN Rail, which has been trying for years to grow its business in the West, won its bid against competition from Calgary-based CP Rail, Canada's No. 2 rail operator, and a U.S. group led by Burlington Northern Sante Fe Corp. and OmniTrax, a short-line operator.
Tuesday's deal is the second acquisition in recent weeks for CN as the railway continues to bulk up in a consolidating North American rail industry. Last month, the company announced it was paying $500-million for eight Great Lakes vessels and two regional U.S. railroads that ship iron ore between mines in Minnesota and U.S. Steel Corp. mills near Pittsburgh.
On Wall Street, the Bear Stearns brokerage said the takeover is a good move for CN, which will benefit from expected efficiencies in consolidating its B.C. operations with those of B.C. Rail. CN has about 1,400 workers in British Columbia, while B.C. Rail employs 1,380.
CN Rail plans to cut about a third of B.C. Rail's workforce - some 430 jobs - mostly through retirements and attrition.
Claude Mongeau, chief financial officer, said CN will save $100-million to $125-million in taxes every year for several years starting in 2005, as a result of accumulated losses at B.C. Rail.
Mongeau said B.C. Rail should add 25 cents a share to earnings by the second year.
Harrison noted that forest products is CN's largest single business, accounting for 22 per cent of revenues, or $1.3-billion a year. Shipping lumber and other wood products account for 70 per cent of B.C. Rail's revenue.
"So it's an excellent fit for us; there are clearly some obvious synergies."
Harrison said enthusiastically that the investment proposed by CN to the rail line to Prince Rupert, plus $17-million promised by the province, could make the remote port into a major gateway for containers from Asia.
He said Prince Rupert is 1.5 days closer to Asia than any other North American Pacific port.
He added there is an opportunity to ship Minnesota iron ore to China through the same gateway.
Among other plans for B.C. Rail, CN promises to:
He said the so-called Prince George Chicago Express will make the trip in 90 hours, about half the time the trip was before CN began providing scheduled rail service in 1998. "So clearly we have a large edge on the competition; "We're comfortable we can have significant growth in B.C."
In Calgary, a spokesman for CP Rail said Canada's second largest railway is disappointed it lost the bidding process, but it will remain a "fierce competitor" to CN in British Columbia.
"We believe we put forward a really strong bid that fully addressed the criteria established in the bid process," Paul Clark said in an interview. "And we believe it would have enhanced rail competition in the northern (British Columbia) Interior."
"But, that said, we're certainly going to be a fierce competitor and we're committed to providing competitive transportation alternatives to the shippers in British Columbia."
[Brotherhood of Locomotive Engineers, 11-25-03, from Canadian Press]
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BC RAIL DEAL ANSWERS CALL OF THE NORTH, PREMIER SAYS
NDP cries sell out!
[Canadian Press, 11-25-03, by Dirk Meissner]
VICTORIA, B.C. -- Premier Gordon Campbell said a $1-billion railway deal Tuesday will fire up northern B.C.'s economic engine, but the Opposition New Democrats called it a sell-out of a valuable public asset.
Canadian National will pay the government $1-billion to hold a lease of up to 90 years on Crown-owned B.C. Rail, which runs from North Vancouver to northern B.C., Campbell said. Under the deal, 430 jobs will be lost - about a third of the current workforce - but another 575 jobs will be created when other elements of the deal are factored in, according to the news releases issued with the deal.
The future of B.C. Rail has been the focus of intense public debate in recent months as communities, unions and politicians debated the best route for the railway.
B.C. Rail is $500-million in debt, but provides a vital transportation and economic lifeline for many northern communities.
Critics predicted the privatization or sale of B.C. Rail could result in service cuts and jobs lost.
CN president Hunter Harrison said of the 430 job cut over the next three years, up to 250 of those would be lost through early retirement and the other 180 jobs would be lost through attrition or severance.
"Our objectives here are to grow the franchise," he said. "We think we know how to railroad. We've been in the expansion mode."
Three private companies - Canadian Pacific, OmniTRAX and CN, a former federal Crown corporation - bid for the right to operate and maintain publicly-owned B.C. Rail, the third largest railway in Canada.
The deal has been controversial because the B.C. Liberals promised not to sell the railway during the 2001 election campaign. The government maintains it is not selling it - the rail bed, tracks and rights-of-way will remain in public hands.
"It's an investment that responds to the call of the North," Campbell said.
Prince George, the largest city in northern B.C., will become a continental gateway, with improvements to its airport and railway infrastructure, Campbell said.
Prince Rupert, located on B.C.'s northwest coast, will benefit from a port expansion and improved railway access from Prince George, he said.
Up to 500 jobs are expected to be created in Prince Rupert where the province will provide $17.2 million to support an expansion of the local port, including development of container terminal facilities.
CN will invest up to $15-million in new rail infrastructure to help support the port expansion.
Improvements to the Prince George airport are expected to create another 75 jobs.
Harrison said CN will locate a division office in Prince George and invest $1-million into the city's B.C. Rail shop complex.
The announcement received mixed reaction in Prince George, where the municipal council - except the mayor - supported a two-year moratorium on any privatization or lease deal for the railway.
"People are going to need more than words to reassure them that this will be economically advantageous. They need to see actions," said Paul Bowles, an economist at the University of Northern B.C. in Prince George.
Carole James, the newly elected NDP leader, called the deal a sell-out of a profitable public asset.
"The government tried to sugar-coat this one," she said. "But it's a lousy deal for British Columbia."
B.C. Rail is currently operating at a profit and the government could have continued to reap the rewards rather than sell to CN, she said.
Campbell said the government will use the $1-billion from CN to pay off B.C. Rail's $500-million debt, invest in Prince George and Prince Rupert and fund other government endeavors.
The government introduced legislation allowing it to proceed with the CN deal, which is expected to close within the first three months of the new year.
Labour leaders condemned the deal, while business leaders applauded it.
Jim Sinclair, B.C. Federation of Labour president, in a bitter speech at a Vancouver protest, called Campbell a liar.
"I thought we elected a government. Instead we elected a real estate company. Instead we elected people who have no vision for this province except to sell it."
Sinclair warned CN British Columbians won't stand for the deal and will force Campbell to back down like he did on the sale of the Coquihalla toll Highway.
"Liar!" the crowd screamed repeatedly.
Lance Yearley, vice chairman of the council of trade unions for B.C. Rail, said workers can't trust Campbell now when he says only a few hundred jobs will be lost.
He said he is just as suspicious of promises that freight shippers will have lower rates, even though CN will have a monopoly, and that northern communities will be well-served by CN Rail.
"We believe the sale of B.C. Rail will cost most of our members their jobs," said Yearley. "It will cost B.C. hundreds of millions of dollars."
But a spokesman for one of the largest forest companies in B.C. supported the deal.
"We don't think B.C. Rail can be competitive for us long-term," said David Emerson, Canfor's chief executive officer. "So we're quite comfortable to work with CN going forward and build a truly integrated supply chain partnership."
Prince Rupert Mayor Herb Pond said people will finally have a chance to analyze the details of the deal after months of speculation.
"I think the bulk of northern British Columbians are going to find it's a very positive move," he said. "That it is a move that's going to put families back to work sooner rather than later."
Campbell said the government will seek a partner to provide passenger service on the railway.
Other highlights under the deal include:
[Brotherhood of Locomotive Engineers, 11-25-03, from Canadian Press]
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CN PICKS PRINCE GEORGE FOR NEW BC NORTH DIVISION OFFICE - PLANS $1-MILLION WHEEL SHOP INVESTMENT IN CITY
New Chicago Express train planned; yard consolidation opens door to downtown redevelopment
[CN, 11-25-03]
PRINCE GEORGE, B.C., Nov. 25, 2003 - CN will make Prince George home to its new B.C. North Division office and invest one million dollars in a new state-of-the-art wheel shop here as part of its partnership with BC Rail.
CN also plans to move most of its switching activities from its downtown yard to BC Rail's yard, freeing up significant city real estate for potential commercial, light industrial and recreational development. Furthermore, CN's partnership with BC Rail will generate new municipal tax revenues for the city. CN plans to work closely with city officials to phase in proposed land use changes.
Prince George-area shippers stand to gain improved market access following CN's partnership with BC Rail. The integration of the two carriers will generate a critical mass of freight traffic to introduce a new "Chicago Express" train for forest products on a schedule of 90 hours, or less than four days. This schedule is much faster than the current CN/BC Rail schedule and those of competing railroads.
CN will pay the B.C. government $1-billion in cash to acquire the outstanding shares of BC Rail Ltd., along with the right to operate over BC Rail's roadbed under a long-term lease. BC Rail's rail bed will remain in public hands, with CN assuming responsibility for rail transportation and infrastructure maintenance.
David Edison, CN's vice-president, Corporate, based in Vancouver, said: "Prince George will become a key administrative and maintenance centre on CN's network in our new partnership with BC Rail. We will strengthen BC Rail's mechanical forces here, and we are ready to work with the city on ways to redevelop CN's downtown yard. These efforts should provide lasting economic and social benefits for Prince George."
CN's new B.C. North Division office will be responsible for all B.C. operations north of Lillooet and west of Dawson Creek. Transportation, customer service, engineering, mechanical and general management employees will be located in Prince George.
The new wheel shop at the BC Rail mechanical complex will allow CN to bring back in-house wheel repairs that it currently contracts out to United States suppliers, and to repatriate BC Rail wheel work that is now outsourced in Tacoma, Wash. CN will perform wheel work from its Western Canada operations in Prince George, while its Eastern Canada wheel work will continue to be done in Winnipeg.
CN's operating plan calls for a combined CN/BC Rail workforce of 580 in Prince George by the third year of its operation of BC Rail, resulting in a decrease of only 25 BC Rail positions.
CN's plan to introduce new tour trains between Vancouver, Whistler and the B.C. North in partnership with qualified third party operators is expected to have substantial employment potential in tourism-related fields in Prince George.
CN's redevelopment plans for its downtown yard would assure continued service to nearby shippers, but also create opportunities to improve the quality of urban life in Prince George. Here are the principal elements of the plan:
CN would retain its mainline and several storage tracks at the yard to stage traffic to and from Prince Rupert.
Service would be maintained for existing customers abutting the yard. There is also potential for new rail customers to locate in the vicinity of the yard, in appropriately zoned areas.
All other CN operating functions would move to BC Rail's yard.
Surplus CN rail yard land would be available for commercial development in the downtown core along First Avenue and for light industry to the north, consistent with the city's official plan and zoning.
CN would donate part of the yard to the city to expand the scenic Cottonwood Park and expand the area's recreational system.
A smaller CN yard would reduce the city's cost to build a new crossing of the Nechako River. Currently, the preferred route calls for a bridge to span the width of CN's Prince George Yard.
The VIA Rail Canada Inc. station, which currently occupies a city-owned building, may need to move to a nearby location in the downtown area to accommodate new development along First Avenue.
[CN, 11-25-03]
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LATER STORIES . . . .
UNIONS CALL FOR AUDIT OF BC RAIL SALE: Rail unions want the auditor general to investigate the government's sale of the provincially owned railway to CN, according to the Vancouver Sun. The Council of Trade Unions for the railway says an independent review is needed because of claims by other bidders that the sale process was unfair. In a letter to Auditor General Wayne Strelioff, the council says CP Rail and Omni-Trax Burlington Northern Sante Fe both complained that the process favoured CN. Council chair Bob Sharpe says an audit is also needed because the government refuses to release details of the contracts with CN. He also notes that CN is a major contributor to the Liberal party, and that secret information about B.C. Rail was leaked while bidding was still open. Last week, the government announced a billion-dollar deal in which CN will have a 60-year lease on B.C. Rail lines and equipment. The deal will result in the loss of at least 430 jobs, which the Liberals say will be offset by investments in affected northern B.C. communities. [United Transportation Union, 12-2-03, from iem in Vancouver Sun]
CN, BC RAIL SEEK TOURIST-TRAIN OPERATOR: Canadian National Railway Co. and BC Rail Ltd. currently are accepting proposals from a third party interested in operating tourist trains on BC Rail's line between North Vancouver and Prince George, British Columbia, and CN's line between Prince Rupert, Prince George and Jasper, Alberta. The request for proposal (RFP) is part of CN's recent agreement with the British Columbia government to acquire BC Rail's outstanding shares and operate over the 1,400-mile regional's roadbed under a long-term lease. The tourist trains are expected to generate significant economic activity in the area, according to a prepared statement. Parties interested in submitting a proposal should notify InterVISTAS Consulting Inc. - which is managing the RFP process - in writing by December 16. CN and BC Rail will assess proposals based on certain criteria, such as new economic development in communities along the line, improved rail access to the 2010 Olympic facilities in Whistler, B.C., and the creation of railway and associated jobs to prepare and operate new train service. [ProgressiveRailroading.com, 12-8-03]
GOVERNMENT CONSULTANT PRAISES BC RAIL SALE: The recent sale of BC Rail's freight service to Canadian National Railway was a fair deal for British Columbia that improves competiveness of B.C. industries, according to a government-commssioned report that was released December 17. The report by Charles River Associates - a Boston, Massachusetts-based consulting group - was commissioned by the provincial government to evaluate the fairness of the bidding process for the crown-owned railway, and to determine if B.C. received good value. In both cases, the consultant said the answer is yes. The consultant said that B.C. will forfeit between $6.4-million and $7-million of future tax revenue as a result of the transaction, but concluded that the province did well compared to other recent railway sales. "The financial value obtained by the province was above what might be expected, based upon a quantitiatve comparison of the BC Rail transaction to recent, similar railroad transactions," the report says. It estimates the value of BC Rail at between $701 and $770-million, and says the agreed-upon price of $750-million "suggests that CN valued the [freight] operations appropriately." CN's total bid price was $1-billion, which included the $750-million for freight operations including freight cars and engines, plus a $250-million payment for $2-billion worth of BC Rail debts and losses that CN can use as tax writeoffs. Finally, the report opines that the deal will suit the B.C. government's objectives for reasonable shipping rates and opening up new economic opportunity in the northern part of the province. [Brotherhood of Locomotive Engineers, 12-18-03, from article on the Vancouver Sun website]
CANADIAN PROBE TIED TO DRUGS, BC RAIL DEAL: The Royal Canadian Mounted Police (RCMP) are investigating whether ministerial aide Dave Basi was involved in a cross-border drug-trafficking scheme and breached the public trust in his handling of the province's privatization of BC Rail, according to this report by Jeff Lee published by the Vancouver Sun. On Dec. 28, RCMP and Victoria police officers raided the offices of Basi, the ministerial assistant to Finance Minister Gary Collins, and Bob Virk, assistant to Transportation Minister Judith Reid. The investigation included telephone wiretaps, which captured conversations involving Basi and caused police to suspect he might have been involved in financial aspects of a scheme to trade B.C. marijuana for U.S. cocaine. Information from the wiretaps led police to investigate whether Basi might have breached the section of the Criminal Code dealing with breach of public trust in connection with the privatization of BC Rail. Information also led them to raid the Victoria and Vancouver offices of Pilothouse Communications, which represented Denver-based OmniTRAX, one of four potential bidders for the rail line. Pilothouse's main representative for OmniTRAX was Erik Bornman. The raids prompted the government to fire Basi and suspend Virk with pay. The government revealed that Basi, who earned about $67,000 a year, will receive severance payments totaling $54,000. Basi, through his lawyer, has insisted he did nothing wrong and wants his name cleared. The government's actions against Basi and Virk followed the raid on the legislature, in which police seized computers and boxes of files from their offices. Basi's role as ministerial assistant to Collins involved coordinating legislative bills. It also apparently involved the BC Rail file. In 2002, the government signaled it was considering privatizing the railway company, which operates a number of northern routes. Last July, Reid, the transportation minister, revealed that there were four potential bidders for the freight operations, most notably CN Rail and a joint venture involving OmniTRAX. The province went ahead with CN in a $1-billion deal. It is not clear how Basi's alleged breach of trust relates to the bidding process. A spokesman for OmniTRAX told The Sun police have not contacted the rail company for information. The decision to award the railway deal to CN was controversial. The Sun earlier reported that Premier Gordon Campbell was a week away from signing the final deal when his office received a sharply worded critique of the bidding process from Marcella Szel, vice-president for legal affairs for the Canadian Pacific Railway, which was one of the bidders. The Liberals were insisting that three bidders were still in the running, but the CPR had concluded that CN Rail had the inside track. The letter complained about "a breach of fairness" and a "violation of intent" in the bidding process for BC Rail. Szel advised that the CPR was formally withdrawing from the bidding, a move that left only CN and OmniTrax on the official list. [United Transportation Union, 1-9-04, from report by Jeff Lee in Vancouver Sun]
UNIONS SAY BC RAIL DEAL SHOULD HALT AFTER REPORTS LINKING TO LEGISLATURE RAID: Unions heaped more speculation Friday [January 9] onto a police raid last month at the B.C. legislature which resulted in the firing of one ministerial aide and the suspension of another. The head of the B.C. Federation of Labour told reporters he wants the provincial government to cancel the sale of BC Rail after newspaper reports that connected the raid to the privatization plan. Federation president Jim Sinclair said Friday signing a $1-billion deal with CN Rail while there's a police investigation would be irresponsible. "We think in light of that, the evidence is now to the point where we believe cancelling this deal makes sense for British Colombians," said Sinclair. He said it was obvious to unions that "from what we have read in the paper, that this deal should not proceed, that these revelations place another dark cloud on a deal that... was entirely negotiated behind closed doors." But Sinclair admitted he had no other proof that the BC Rail deal was connected to the raid, other than what he's seen in the media. [Brotherhood of Locomotive Engineers & Trainmen, 1-9-04, from Canadian Press article by Terri Theodore]
BC RAIL DEAL SHOULD PROCEED, TRANSPORTATION MINISTER INSISTS: The $1-billion B.C. Rail deal should go ahead, Transportation Minister Judith Reid said yesterday [January 12]. The deal came under fire after police raided the B.C. legislature December 28 and seized documents from two political aides with close connections to the privatization of the railway. But Reid said she has faith in the privatization process. During the raids, the office of Reid's aide, Bob Virk, was visited by police and dozens of boxes of government files seized. Virk was suspended with pay. Police also raided the offices of Dave Basi, ministerial aide to Finance Minster Gary Collins, taking more files. Basi was fired. Reid said she has not been visited by the police. Last week, union labour leaders called for the deal to be put aside until the police investigation is finished. [Brotherhood of Locomotive Engineers & Trainmen, 1-13-04, from Vancouver Province website article by Steve Berry]
BC RAIL UNION CALLS FOR AUDIT OF PROVINCE'S CN AGREEMENT: The Council of Trade Unions on BC Rail is urging the provincial government to audit British Columbia's BC Rail Ltd. privatization agreement with Canadian National Railway Co. because of "irregularities" throughout the bidding process. "Both of the two losing bidders say the BC Rail privatization process was unfair to them," said union Chairman Bob Sharpe in a prepared statement. "Many key parts of the deal are secret. This all cries out for a full and public audit." Auditor General Wayne Strelioff believes provincial budget cuts are limiting his office's ability to examine British Columbia's privatization deals. "[The province] has an obligation to the people of British Columbia to ensure that the auditor general's office has the funding necessary to conduct a full audit of the BC Rail privatization deal," said Sharpe. "Surely with a billion-dollar deal, the province can find a tiny fraction of that amount of money to do a full and independent audit - doing anything less than that will lead people to rightly conclude that there are strong reasons why the government does not want the sale of BC Rail examined thoroughly." In November, the province and CN entered into a "BC Rail Investment Partnership" under which the Class I would pay British Columbia $768-million in cash to acquire the 1,400-mile regional's outstanding shares and the right to operate over BC Rail's roadbed under a long-term lease. The regional's rail bed would remain in public hands, with CN assuming responsibility for rail transportation and infrastructure maintenance. Subject to Canada Competition Bureau approval, the transaction is expected to close during the first quarter. [ProgressiveRailroading.com, 1-20-04]
POLICE RAID LINKED TO SALE OF BC RAIL: According to a court document released March 2, police raided Bristish Columbia's legislature in a corruption probe involving the sale of BC Rail to Canadian National Railway Company, according to this Reuters report. Police were investigating if two officials, who are not named in the document, passed along "unauthorized information to persons interested in government business for the purposed of obtaining a benefit." A British Columbia Supreme Court judge released a brief summary of the investigation in response to media attempts to gain access to the full search warrants used in the December 28 raid, which remain sealed by the court. Rumors of a link between the BC Rail sale and the raid of the legislative offices in Victoria had been reported in the media, but the documents released on March 2 marked the first official confirmation. Police seized documents from offices of senior aides to the finance and transport ministers, and from one of the aide's homes, and from the office and home of a lobbyist who represented an unsuccessful bidder for BC Rail. Investigators said the corruption investigation stemmed from a separate investigation into illegal drug smuggling. Details of the drug investigation remain under court seal, but may be released at a hearing on April 1. No criminal charges have been filed in either of the investigations, which the Royal Canadian Mounted Police say are still in their early stages. British Columbia agreed in November to sell the freight operations of provincially owned BC Rail, Canada's third largest railway, to Canadian National for C$1-billion (US$750-million). CN beat out bids from Canadian Pacific Railway and a U.S.-based coalition of Burlington Northern Santa Fe Corp. and shortline operator OmniTrax. The raided lobbying firm did work for OmniTrax. The winning CN bid is awaiting approval from the federal Competition Bureau. The document released contained few details about the probe, but said that, among the documents used by the police, was an independent report prepared for the province on the fairness of the bidding process. The December 17 report declared the process fair, but said there were two violations of the confidentially process - in one case a report was given the media and in the other data was released prematurely to one of the bidders. [United Transportation Union, 3-4-04, from Reuters report]
CANADIAN LABOR FEDERATION URGES HALT TO BC RAIL SALE: British Columbia and Canadian officials should halt the sale of BC Rail Ltd. to Canadian National Railway Co. because of recent allegations that the finance and transportation ministers office breached the public's trust during the transaction's bidding process, said B.C. Federation of Labor President Jim Sinclair in a prepared statement. "Until the public is fully satisfied there were no criminal activities involving BC Rail, the sale must be stopped," he said, referring to a police search recently conducted at the Liberal Finance and Transportation Ministers office that uncovered questionable documents tied to the BC Rail bidding process. The allegations cloud Finance Minister Gary Collins' office, where "a breach of trust may have occurred under his watch," said Sinclair. "To preserve the integrity of his office, Collins must step aside until this matter is resolved." The allegations also confirm concerns voiced by several parties during the bidding process, he said. In October, the province chose CN's bid over competing proposals from Canadian Pacific Railway and a Burlington Northern Santa Fe/OmniTRAX Inc. partnership. "All along, the government has conducted secret negotiations and closed door meetings to keep details away from the public," said Sinclair. "Now, there are clouds of criminal activity and potential criminal breach of trust hanging over this deal." The federation plans to continue its campaign to stop the sale, which is supported by the Council of Trade Unions On BC Rail. Federation and union officials expect to address the Canada Competition Bureau when the agency considers CN's purchase of the 1,400-mile regional. [ProgressiveRailroading.com, 3-5-04]
BC RAIL PROBE WIDENS: The B.C. government cancelled the bidding process for a BC Rail spurline March 10, revealing the potential deal is part of a widening ongoing police investigation involving the Crown-owned railway. Transportation Minister Kevin Falcon said the probe involves the bidding process for the Roberts Bank subdivision, the line that services a huge coal terminal south of Vancouver. It involves advisers to one of the bidders receiving confidential government information that would have resulted in British Columbia not receiving fair value for the rail subdivision, Falcon said. "This information was reviewed by the evaluation committee and they have determined that one or more of the advisors to the proponents may have come into possession of confidential material prepared as part of the port subdivision request for proposal process," said a news release issued by John McLernon, chairman of the B.C. Rail evaluation committee. "This material, which is significant to the province's negotiating and financial position, was not intended to be shared with proponents," the statement said. Falcon said the latest information about the police probe does not threaten the $1-billion (C) Canadian National purchase of B.C. Rail last year. "We have no information to suggest that the successful proponent CN has come into any information that would undermine the outcome of the B.C. Rail-CN investment partnership," he said. "I and the evaluation committee are confident the province accepted the best proposal for the B.C. Rail-CN partnership, and indeed did receive fair value." The Roberts Bank line was being sold in a separate bidding process. The government had received three bids for the spurline, said Falcon. One bid was from a group of companies that included CN and the Vancouver Port Authority. OmniTrax and McQuarrie of Australia also offered a bid, as did Southern Railway, he said. Falcon said the spurline deal was worth between $70-million and $100-million (C). New Democrat Leader Carole James said the Liberals have consistently denied that police investigations have compromised government business, but now it's been forced to dump a deal. "It doesn't matter what this government seems to be doing these days, there seems to be an investigation around it," she said. It's one more blow for British Columbia." The minister refused to offer further comment when asked if Wednesday's move was related to a police raid last December on the offices of ministerial assistants in the B.C. Finance and Transportation ministries. A summary of search warrant information released last week said the raids related to possible influence-peddling and breach of trust connected to B.C. Rail. Controversy swirled around the government's sale of the Crown-owned railway last year to CN after competitors CP and OmniTRAX-Burlington Northern Santa Fe complained the process was unfair. That report found the sale of B.C. Rail was conducted properly. [Brotherhood of Locomotive Engineers & Trainmen, 3-11-04, from article by Dirk Meissner in Canadian Press]
FIRST NATIONS OPPOSE BC RAIL DEAL: British Columbia First Nations says the BC Rail lease agreement with CN Rail infringes on aboriginal rights, and should be scrapped, according to this CBC News report. The demand by the Title and Rights Alliance comes after new information on the privatization was leaked to the media. That information indicates the lease agreement between the Campbell government and CN can be extended every 60 years - for a total of 990 years. The Alliance's Justa Monk says the 16 First Nations that have thrown their support behind the deal, did so on the basis of the original information released by the government. But he says that support could change with this new revelation - noting that nine other First Nations with a direct interest are also rejecting the deal. Premier Gordon Campbell says aboriginal title concerns over the BC Rail sale will be addressed by the government. [United Transportation Union, 4-20-04, from CBC News report]
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