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Yesterday, Canadian National Railway Co. and Canadian Pacific Railway officials expressed disappointment that a federal court dismissed their appeals of a Canadian Transportation Agency (CTA) decision issued earlier this year that will reduce the Class Is’ revenue entitlement for grain transportation retroactively under the Canada Transportation Act.

In February, the CTA cut grain rates by 8 percent under railway revenue caps retroactive to Aug. 1, 2007, to reflect a determination of actual railway maintenance expenditures for government-owned grain hopper cars. The Class Is appealed the decision, claiming it was flawed and the retroactive application was illegal.

The CTA decision will reduce CN’s and CPR’s Canadian grain revenue by $18.5 million each for the 2007/08 crop year, the Class Is said.

“It is especially frustrating to CN that the rate reduction is retroactive: rates that were set in the spring of 2008 are to be applied to grain that moved in August of 2007,” CN officials said in a prepared statement.

CN and CPR plan to review the court's decision and explore legal recourses.

“Rail rates for grain transport in western Canada were already among the lowest in the world, and we can see no sound policy reason to lower them further,” said CN President and Chief Executive Officer E. Hunter Harrison. “CN is not in a position to cross-subsidize its grain movements with profits generated from the movement of goods in other sectors of the Canadian economy. As a result, CN will have to carefully review its future investments in grain-related equipment and infrastructure.”