Payments from Canada’s two major railways to the Western Grains Research Foundation have been made but will now sit in trust, pending the outcome of the railways’ bid to get at least some of that cash back.
While it’s not new for the railways to file court appeals of the penalties ordered by the Canadian Transportation Agency, the overages for the 2007-08 crop year are unusual for their size: $68.7 million in all, including the two railways’ freight revenue overages plus penalties of 15 per cent each.
The overages were made massive for 2007-08 due to the CTA’s recalculation of what railways could claim for grain hopper car maintenance expenses.
Given the amount involved, farm groups such as the Canadian Wheat Board, Western Canadian Wheat Growers and Western Grain Elevator Association have recently called for a formula to instead directly repay Prairie farmers who’ve been overcharged for their grain movement, and leave the WGRF with the 15 per cent surcharge penalties.
On the other side of the issue are groups such as the Saskatchewan Canola Growers Association and Manitoba’s Keystone Agricultural Producers, who contend that the funds should continue to flow to the WGRF, as now required by current federal regulations, regardless of the overages’ size.
With that debate in mind, another group, Grain Growers of Canada, recently challenged the WGRF to explain how it would use the interest generated from the funds to benefit producers.
“A detailed research funding plan is tough for us to provide,” WGRF executive director Lanette Kuchenski said in a release Wednesday announcing that it would hold the $68.7 million in trust.
“At this point, we don’t know the fate of the (railways’ planned) appeals so we can’t be sure how much money will actually be available or when that decision will be final. Probably the best guide to future performance is how (the WGRF’s) endowment fund money has been invested in the past.”
A small amount of interest is now being earned on the funds, the foundation said, though it noted that when the railways have successfully appealed their freight overage penalties in the past, the WGRF has sometimes had to pay part of the interest earned on the principal back to a railway.
“It will likely be a few months before it is known if the courts will hear the appeal,” Kuchenski said. “If the appeal proceeds, the money could be tied up for a few years.”
The WGRF’s endowment fund, backed also by a research checkoff, has since 1981 provided over $19 million in funding for over 200 projects across a number of different crop types, the foundation said.
The amount available to invest depends on interest rates, but “in recent times, it has been about $700,000 a year.”