CP cites drawbacks of 'Fair Rail' act, sets share purchase plan

Canadian Pacific officials on Friday expressed "extreme disappointment" with the proposed Fair Rail for Grain Farmers Act, which would amend the Canada Transportation Act and the Canada Grain Act to establish additional measures aimed at addressing the nation's grain-movement backlog by increasing transportation efficiency.

The bill would provide the Canadian Transportation Agency the authority to extend interswitching distances in Saskatchewan, Alberta and Manitoba to 160 kilometers for all commodities to increase competition among railroads and provide shippers access to alternative rail services.

The proposed interswitching rules could damage Canada's competitiveness and economy, effectively transferring traffic that normally would move over Canadian railways and ports to U.S. railroads and ports, potentially resulting in job losses and reduced investments, said CP Chief Executive Officer E. Hunter Harrison in a press release. Interswitching also would lead to double handling of grain shipments, which would slow down the grain supply chain and negatively impact transit times, he said.

At close to 80 million metric tons, the current grain crop is 27 percent larger than the previous record set in the 2008/09 crop year and 37 percent above the five-year average. Rail is only one element of the supply chain that's facing the challenges of transporting the huge crop, including farm storage, country elevator capacity, terminal capacity and overall port capacity, said Harrison.

"Canada's grain handling system is just not built to handle this record amount of grain," he said. "While it is easy to blame the railways for 'dropping the ball', it ignores the facts."

CP is concerned about the speed and lack of consultation by the government in making significant changes to the rail transportation system that could result in unintended consequences for all stakeholders, he said.

"We need to move away from reactionary legislative interventions that target unfairly one participant and potentially damage the Canadian economy. Instead, we should all focus on commercial solutions to maximize overall capacity in the grain supply chain," said Harrison.

Meanwhile, CP also announced on Friday that it plans to purchase for cancellation up to 1.3 million of its common shares pursuant to private agreements to be entered into between the Class I and a third‐party seller.

Purchases will be made through several transactions prior to March 16, 2015, in accordance with an issuer bid exemption order issued by the Ontario Securities Commission on March 28. The shares bought will be counted towards a share purchase program announced on March 11 for up to 5,270,374 shares, and will not exceed one-third of the maximum number of common shares the railroad can purchase, CP officials said.