KELOWNA, BC; A Kelowna manufacturer is making an urgent appeal for rail service to be restored into the Central Okanagan, citing economic derailment if businesses have to rely on trucking alone.
The line between Lumby and Kelowna was abandoned July 6th when the short line operator, Kelowna Pacific Railway, went bankrupt. The rail KPR operated between Vernon and Kamloops was restored by the Canadian National Railway Co. (CN) following intervention by local businesses, supported by Vernon’s economic development office.
Ashland Canada employs 35 people at their plant in Kelowna, in an industrial park serviced by rail neighbouring Lake Country. It supplies dozens of Okanagan manufacturers with unique products, which many say are essential to business.
If Ashland Canada can’t get rail service back to the Central Okanagan, its business plan at the Kelowna plant will become nonviable, affecting upwards of 600 jobs in the entire region, according to their lawyer.
“I think, at this point, there are still a lot of people, a lot of industry, that are not aware of what’s at stake,” says Barry Penner, legal counsel for Ashland. “There are hundreds of jobs directly or indirectly tied into this railway line through the industries that have flourished, such as the plastics and fiberglass industries in the Okanagan.”
Penner, a former BC Liberal MLA and cabinet minister, appealed to the Canadian Transportation Agency (CTA) on behalf of Ashland looking for an interim injunction to force CN and KPR to immediately resume service and honour its service obligations, citing irreparable harm to its business, such as “the loss of strategic advantage, reputation, customer relationships and market share and the concomitant damages caused by delay and backlogs.”
In its response to the Ashland’s application for an injunction, CN argued that operating on the line would be “impossible” because its condition is “very poor”.
“CN submits that an investment of up to $10M would be required to upgrade this line and allow CN to operate. CN claims that it would suffer the greater prejudice if it had to incur such an expense, considering that Ashland’s traffic volume does justify the investment,” states a summation of CN’s case prepared by the Canadian Transportation Agency.
On October 22, the CTA ruled against Ashland, but the company continues to appeal to the Agency to address the “serious issue” the CTA noted arising from the loss of rail service to the Central Okanagan.
Penner is also appealing to business and government to join their lobby to re-open the abandoned line.
“All levels of government and interested businesses and organizations in the community need to rally at this point and step up and look for another option,” says Penner.
Campion Marine, Canada’s largest boat manufacturer, doesn’t rely on rail at their Kelowna facility, but does depend “100 %” on Ashland’s products to build its boats.
Campion’s boats are made with Ashland manufactured bio-resin, which the chemical company calls, “the first resin that uses a substantial amount of soybean oil and corn derived ethanol in its formulation”.
“It’s not being made anywhere else,” says Brock Elliott, owner of Campion Marine Inc. “It’s being made right here in Kelowna.”
“This is one of the reasons why Campion was established here in Kelowna,” he says of Ashland’s supplies. “It’s not only for Campion as well. We’re 51 employees here but there’s also all the other businesses up in Armstrong. There’s the Kohler’s. There’s the Maxx, the tub and shower businesses up there. They are much larger than us.”
Due to contract pricing, Ashland is presently absorbing the extra cost of trucking, which their lawyer says will add up to almost $3M a year in extra expenses, a reported 16 % increase over rail costs.
But if Ashland increases its product prices to pay for the extra transportation cost of getting their materials delivered from Texas, California and Alberta, Elliott says that new cost would make their boat prices noncompetitive.
“We’ve got to get this resolved,” says Elliott. “It’s not only for Ashland Chemical, it’s for all the other businesses that are using the railway and should be using the railroad. From Tolko Industries, cement businesses, recyclers, and so on.”
Penner says Ashland will not buy the line to restore service, but is looking to form a coalition of several businesses who can find a short line operator and get rail services back up and running.
And while Penner is looking for the City of Kelowna to step up and assist the businesses in the lobby to keep rail services in the Central Okanagan, the City says it is not interested in stepping into the current litigation.
“I think the legal process between a shipper and a private sector entity is not a place for the City to get involved,” says Doug Gilchrist, Director of Real Estate & Building Services for Kelowna. “But we do realize the importance to the community and want to work with the province and the federal government where we can.”
For now, that means the City is only watching the process unfold.
By next June, if CN cannot come to an agreement with a new operator to replace the KPR, the line will likely be scrapped and the land offered to the federal, provincial and municipal governments.
If Kelowna ends up owning the line, it has no interest in keeping rail service in the city.
“ I think the City’s commitment to other forms of transportation, our efforts and the extension of Highway 33 and John Hindle Way and even the second crossing is where we focus our efforts and the transport of goods and services and the movement of people,” says Gilchrist. “It’s really where our authority lies is in roads and not in rail.”
Mayor Walter Gray says “the corridor” is what the city wants to preserve, not the rail service.
“That is the key to future operation,” says Gray.
Businesses which rely on rail say the City’s view is shortsighted.
“If you look at the long term future, why would you ever want to give up the railroad?” says Campion’s Elliott. “It’s an absolutely amazing asset for us to have here. It goes right by the airport. It goes right downtown. It goes right to the lake.”
Penner says once rail is gone in Kelowna, it likely won’t be brought back.
“If that happens, that will not only impact the jobs today, but it will put a limit on what kind of jobs can be created in the future,” he says.
Penner believes the City’s plans for a recreation corridor on the Kelowna line would pair well with rail service.
“I believe that the two things can go hand in hand,” says Penner. “We shouldn’t just say, ‘Oh well, the railway service is closed. Now we can have a walking path on the railway where the tracks used to be.’ Let’s find a way where we can maintain jobs and recreation for the community.”
During recent proceedings, the Kelowna Pacific Railway’s ‘Certificate of Fitness’ was cancelled, which indicates the operator is no longer a railway company within the meaning of the CTA.
According to the CTA’s October 22nd decision, “The Trustee (dealing with the bankruptcy) submits that KPR no longer has the funding or ability to operate a railway, that KPR has no assets, officers, directors, employees or bank accounts.”
Ashland’s response to the CTA’s decision is expected to be filed by October 28th.
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