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Transportation, Railroads

truck transportation companies, Canadian Pacific Railway, Confederation, transportation sector, CPR

Rail transportation has been crucial to the formation of Canada but has declined in recent decades, due chiefly to the popularity of motor vehicles. The two major railways are the Canadian National (CN), formerly a federally owned corporation, and the Canadian Pacific Railway (CPR). Their declining revenues led Ottawa to create a combined passenger network, VIA Rail, in 1977. However, revenue from passenger service was not sufficient to cover the costs of the service, and in 1990 half the routes were closed. Ottawa is reducing federal subsidies of passenger rail, and further closures are expected. However, the government is legally bound to operate a passenger rail service across western Canada because that was a condition of British Columbia’s entry into the Confederation in 1871.

The profitability of freight service has also been declining, although less severely. These problems stem largely from special rate structures legislated by Ottawa in 1897 as part of the Crow’s Nest Pass Agreement and later negotiations. In essence, the CPR received a grant to pay for laying track through Crowsnest Pass in the Rockies, and in return agreed to charge low rates for hauling grain. These rates were intended to remain in effect forever. As the CPR’s costs went up over the years and the so-called Crow rate did not, profits sank and it was difficult to make improvements to the line. The rate limits were partly abrogated in 1983 and fully removed in 1996, which was a profitable year for the CPR. Meanwhile, the CN was privatized (turned over to private operators) in 1995, and many of the rules regulating the rail system were relaxed. For example, the railroads could now close unprofitable branch lines that they had been required to maintain. As a result of this relaxation, railroads were better able to integrate their operations with marine and truck transportation companies in the emerging intermodal system. In 1995 railways accounted for 25.4 percent of the total value generated within the transportation sector.

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