Western grains foundation may receive $3.9 million from CP
Source: Murray Lyons - The StarPhoenix
Published: January 2nd 2008

A Saskatoon-based research funding organization could be receiving about $3.9 million from the Canadian Pacific Railway, but the administrators of the Western Grains Research Foundation (WGRF) aren't yet assuming all that money will come its way.

The money from the CPR is essentially a fine assessed by the Canadian Transportation Agency against the railway for exceeding its revenue cap for moving western grains in the 2006-07 crop year.

The research foundation puts the money from railway penalties into its endowment fund which can support research crops for any grain, oilseed or pulse crop grown in Western Canada. Money from the principal in the endowment fund earns interest, which ranges from $300,000 to $400,000 a year.

A year ago, the WGRF was awarded $1.5 million from the CPR, but the railway appealed that ruling and WGRF was eventually asked to repay more than half of the money or $870,783.

That led to complications for WGRF on whether it could actually allocate the railway money for research, according to WGRF communications manager Amanda Soulodre. The need for certainty about the funding total is complicated because most crop research projects require ongoing funds as projects typically require at least four growing seasons to complete, she added.

"It's very difficult to make decisions," Soulodre said Monday. "We invest those dollars and only the interest is used to fund crop research. It means we have to lock in to these long-term investments in order to get the best returns and fund the most research possible."

Last year, the WGRF didn't get notified by the CPR that it was appealing the 2005-06 CTA penalty and Soulodre says the WGRF assumed the full $1.5 million could be invested. She says the agency has had to work with the CPR on the timing of the repayment of the money clawed back on appeal.

In the early part of the decade, there was no issue involving railway money because Canada's two railways did not exceed the revenue cap placed on them by the legislation that replaced the old statutory Crow rates. The rate cap is supposed to protect western Canadian farmers from the duopoly power the railways have in setting rates.

Starting in about the 2004-05 crop year, the railways did begin to exceed the rate caps and that has continued.

The CPR has 30 days to appeal the $3.9 million penalty in the latest crop year.

The CTA did not find that Canadian National had exceeded its revenue cap for grain movement in 2006-07. However, the WGRF received $2.8 million from CN for exceeding the revenue cap the year before. That amount is still subject to an appeal with a final ruling expected early this year.

Under legislation, the WGRF was named the beneficiary of any such revenue cap fines because it was considered administratively too complicated and costly ever to return that money to individual grain producers, Soulodre explained.

The WGRF has two separate funds. Its endowment fund is used to fund general research for all crops, while money deducted from Canadian Wheat Board sales of wheat and barley each year is used to directly fund research into those crops.

mlyons@sp.canwest.com - The StarPhoenix (Saskatoon) 2008