Three shortlines to buy Saskatchewan’s grain cars

A rail car from SGCC’s fleet. (Dave Bedard photo)

The Saskatchewan government has picked the three buyers who will divvy up its provincially-owned fleet of grain hopper cars.

The province, in its March budget, announced a request for offer (RFO) for the Saskatchewan Grain Car Corporation’s (SGCC) fleet of rail cars as it winds down that operation.

The province said it would give “first priority” to Saskatchewan’s 13 commercial shortline railways and has since accepted three offers.

Regina-based Big Sky Railway — which operates 402 km of track from Saskatoon out to Laporte, Sask., southwest of Kindersley — will get 663 of SGCC’s 898 remaining cars, the province said Wednesday.

Shaunavon-based Great Western Railway, which operates almost 500 km of track in the province’s southwest, will buy 150 cars, while Leader-based Great Sandhills Railway, which operates almost 200 km of track in the same region, will buy 85 cars.

Terms of the deals for each of the buyers weren’t disclosed Wednesday, though the province said it would sell the cars for a total of $9.7 million, or $10,800 per car on average.

The deals are expected to close in the next two to three months, the province said in a release Wednesday.

An evaluation committee, with members from SGCC and the provincial highways ministry along with a consultant, “fairness advisor” and legal counsel, reviewed all offers, the province noted.

SGCC was set up as a provincial Crown corporation to manage a fleet of 1,000 hopper cars for which the province paid $55 million as a “strategic investment” in 1981.

In fiscal 2015-16, SGCC reported $2.66 million in revenue, which it billed as a new record for the corporation. Of its 900 cars at the time, 485 had been leased to Canadian Pacific Railway and 415 to Last Mountain Railway, an affiliate of Big Sky Railway.

About 100 of the original fleet’s 1,000 cars have been deemed damaged beyond economic repair and destroyed, SGCC said. In 2015-16, it ran 85 random mechanical inspections on cars from its fleet, finding 20 in “good” condition, 58 rated “average” and three “poor.”

Under Association of American Railroads rules, the province said in March, rail cars can be interchanged between railways for up to 50 years, meaning SGCC’s cars have about 14 years of service life left.

Given the cars’ remaining service life, “the fleet still has value in the industry,” Dave Marit, the provincial minister for SGCC, said in Wednesday’s release.

“Selling the cars to our shortlines means they will continue to move commodities grown by Saskatchewan producers.”

The replacement cost for SGCC’s original fleet of 1,000 cars was estimated in March to run around $100 million. — Network

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