Four bidders vie for BC Rail - Rail Update - Brief Article

Railway Age, August, 2003 by Alex Binkley

The British Columbia government has short listed Canadian Pacific, Canadian National, OmniTrax in partnership with Burlington Northern and Santa Fe, and RailAmerica as potential operators of BC Rail, provincial Transportation Minister Judith Reid said late last month.

The minister said the government expects to announce its choice by next March 31. She would not provide any details of the bids made by the four railroads nor what impact they would have on the company's 1,700 employees.

The government plans to retain ownership of BC Rail's roadbed and tracks and is looking to the new operator to improve the financial health of the railroad as well as freight and passenger service for the many resource-based communities that it supports.

Meanwhile, government documents obtained by the Vancouver Sun suggest that provincial officials prefer the OmniTrax BNSF proposal because it would keep the railroad under provincial jurisdiction. OmniTrax already has a short lilac operation there. This kind of deal would buffer the partnership from the higher switching costs of CN and CP and "also offer shippers a perception of an independent, third-party owner for BC Rail," the documents noted. They also said that CN control of the line would allow the railroad to dictate shipping rates for the province's forest products industries.

However, CIBC World Markets, which is advising the government on the BC Rail deal, has said that "CN is the most logical candidate." And CN has been aggressively pursuing the deal, contending it could offer regional companies the most extensive market coverage. It also said that CP doesn't have any direct connections with BC Rail and lacks the rail network in the U.S. (RA, June, p. 4). CIBC further said a deal involving the BNSF would work against the interests of the province's two main ports of Vancouver and Prince Rupert.