WINNIPEG, Manitoba (B)--Keystone Agricultural Producers, Manitoba's main farm policy group, says the proposed merger of Canadian National Railway Co. and Burlington Northern Santa Fe may hurt prairie farmers due to the potential loss of competition.

CN and BNSF announced plans Dec. 20 to merge their operations, which would create North America's largest railway. North American Railways Inc. would be created as the parent company for BNSF and as the companion company for CN. The transaction would result in the shareholders of each company having voting and ownership interests in both companies.

KAP said the lack of competition in Montana traditionally had meant that BNSF provided farmers there with poor service.

"We need strong competition to prevent the same thing from happening (to prairie farmers)," said KAP President Don Dewar in a prepared statement.

CN and Canadian Pacific Railway Co., the nation's other major freight carrier, "have never really competed with one another and

to have what would be the largest freight carrier in North America coming into Canada certainly makes the situation worse."

Dewar said the proposed merger places an added sense of urgency and importance on the process of grain transportation reform in Canada, particularly the provisions dealing with competition and reduced freight rates.

KAP has called for a flexible revenue cap to safeguard producers against excessive railway charges, while allowing market forces to work, and a "reverse onus" open access system to increase competition.

Under the reverse onus system, anyone could apply for running rights on the line of another railway. The Canadian Transportation Agency would assume that increased competition is in the best interest of the public, and the owning railroad would have to satisfy the CTA that the proposed operations are detrimental to the public.

"Having these rules in place as quickly as possible has become much more important given the proposed merger," said Dewar. "However, assuming the merger goes through, there will be only five railroad companies left in North America. If this trend continues, open access won't be any use since there will be nobody left to compete."

Combined, CN and BNSF currently operate about 50,000 route-miles of track, employ about 67,000 people and have combined revenues of approximately U.S. $12.5 billion (Cdn $18.5 billion).

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