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In 2003, Canadian National Railway ("CN") characterized its acquisition of BC Rail Ltd. as the "best of both worlds" for BC shippers.1 The deal saw CN effectively acquire most of BC Rail's network and operating assets,2 alongside a 60-year lease to operate over BC Rail's railbed, renewable for a further 30 years.3 The major terms of this acquisition are found in the aspirationally titled "Revitalization Agreement", underlining the driving force behind the sale: "the need to revitalize BC Rail".4
It appears that CN has lost the will to uphold the spirit of revitalization, in favour of the lamentable alternative: giving up. In July 2025, CN released an updated three-year rail network plan ("Three-Year Plan") that indicated for the first time CN's intention to discontinue operating the 200+ mile segment of track between Squamish, BC and 100 Mile House, BC ("Listed Segment") of the former BC Rail. CN had already halted freight operations along the former BC Rail network between Squamish and Williams Lake in April 2020 without indicating its intention to do so in its Three-Year Plan. CN now seeks to formalize that discontinuance of operations, which has prompted some commentary in the media.
In practice, CN's proposed discontinuance would permanently prevent traffic from transiting north along the former BC Rail network beyond Squamish. Further, the proposed discontinuance would permanently require all traffic originating on the former BC Rail network north of Squamish, including traffic originating at Williams Lake, Quesnel, and Prince George, that is destined for Squamish, North Vancouver, Vancouver or beyond to transit via CN's longer railway route through the Fraser Canyon. This includes all traffic destined for the United States via interchange with BNSF Railway at Brownsville, BC. CN's discontinuance of the Listed Segment may also impact the resiliency of CN's rail service to and from Vancouver because CN will no longer have access to an alternative route to BC's Lower Mainland if its route through the Fraser Canyon is disrupted.
The Canada Transportation Act (the "Act") does not require CN to obtain any regulatory approval to discontinue operating the Listed Segment. Instead, the Act mandates a series of steps with which CN must comply before CN may give notice terminating its statutory obligations to provide service on the line. We summarize the statutory discontinue process in this bulletin to provide context to affected parties, including shippers, local communities, governments, and supply chains.
The Discontinuance Process5
Step One: The railway must publish its intent to discontinue the line in its three-year plan for at least 12 months.
CN has now initiated the discontinuance process by indicating in its Three-Year Plan its intention to discontinue the Listed Segment. CN was required to notify the Canadian Transportation Agency ("Agency"), the federal Minister of Transport (the "Federal Minister"), British Columbia's Minister of Transportation and Transit (the "BC Minister"), the chairperson of every urban transit authority6 through whose territory the Listed Segment passes, and all municipalities and local governments through which the Listed Segment passes.
Subsection 142(1) of the Act requires CN not to take any step to discontinue operating a railway line until its intention to discontinue the railway line has been indicated in its Three-Year Plan for at least 12 months, which in the case of the Listed Segment means not before July 11, 2026.
Step Two: The railway must advertise the availability of the line for transfer for continued operations and engage in good faith negotiations with any party expressing an interest in acquiring the line.
This step of the process requires the railway company to advertise the availability of the line for transfer for continued operations and set a date at least 60 days after publication of the advertisement during which the railway must be open to receiving expressions of interest. That step is followed by a period of six months to negotiate and to reach agreement with an interested party. The Agency has the jurisdiction to set the terms of the agreement if one of the parties fails to negotiate in good faith.
If no transfer results from step two, the railway may decide to continue to operate the line, in which case the railway must amend its Three-Year Plan accordingly. Otherwise, it must proceed to step three.
Step Three: If there are no interested parties or if no transfer for continued operations is completed and the railway still wishes to discontinue, it must offer to transfer the line at its net salvage value ("NSV") for any purpose to various levels of government and urban transit authorities.
The railway must send the offer to all the prescribed offerees simultaneously, but the time periods in which each of them may accept the offer run sequentially.
In the case of the Listed Segment, CN would have to offer the Listed Segment for NSV to:
- the Federal Minister, because the Listed Segment passes through multiple reserves (as defined in the Indian Act);
- the BC Minister;7
- every urban transit authority through whose territory the railway line passes; and
- all municipalities and local governments through which the Listed Segment passes.
The Federal Minister will have 60 days (unless the Federal Minister extends that period, which the Act allows) and each of the other prescribed offerees will have 30 days within which to accept CN's offer. A government or urban transit authority that accepts the offer but is unable to agree with CN on the NSV can apply to the Agency for an NSV determination.
Step Four: If no transfer results from the offer to government and public entities, the railway may file a notice of discontinuance with the Agency.
Once CN files this notice, CN's service obligations in respect of the Listed Segment cease. The Act does not prescribe a mandatory time period for filing the notice of discontinuance. In other words, CN has the option of proceeding through the first three steps and then defer filing the notice indefinitely.
Normally, CN would be permitted to dismantle the track once it filed the notice of discontinuance. However, the Revitalization Agreement requires CN to return the track bed and rail infrastructure to the B.C. government,8 subject to a B.C. government option, upon notice to CN given at least one year prior to completion of the discontinuance process, to sell the discontinued lands to CN on an "as is, where is" basis for nominal consideration.9 If CN acquired the discontinued lands from the B.C. government in this manner, it could effectively prevent any rail traffic, whether passenger or freight, from using the discontinued route.
If the Listed Segment is returned to the B.C. government, and it finds a third-party operator for the Listed Segment, CN must negotiate in good faith "reasonable commercial terms for access and interchange" with that operator.10 In practice, however, these terms offer minimal consolation. The Listed Segment is most valuable as a portion of the shortest rail route from Prince George to Vancouver, and without access to rail lines to the north and south of the Listed Segment, it has diminished utility to any future third party operator. It is regrettable that BC efforts to "revitalize" BC Rail have resulted in its former network's devitalization.
Footnotes
1. CN News Release, (November 25, 2003).
2. The deal notably omitted BC Rail's Port Subdivision serving Deltaport and Roberts Bank Port in Delta, BC.
3. British Columbia Ministry of Transportation News Release, (November 25, 2003).
4. Ibid.
5. This process is generally applicable to all federally-regulated railway lines, but a modified discontinuance process applies to certain grain-dependant lines specifically identified in the Act.
6. Section 87 of the Act defines "urban transit authority" as "an entity owned or controlled by the federal government or a provincial, municipal or district government that provides commuter services."
7. Paragraph 145(2)(b) of the Act requires an offer to be made "to the minister responsible for transportation matters in the government of each province through which the railway line passes."
8. Section 10.1 of the Revitalization Agreement requires CN to adequately maintain all "Leased Property", and section 11.2 prohibits CN from removing leased track and infrastructure during the term of the agreement. Under section 3.5(a) of the Revitalization Agreement, the lease will terminate automatically in the event of discontinuance. See also British Columbia Ministry of Transportation News Release, (November 25, 2003).
9. Revitalization Agreement, s 3.5(a).
10. Revitalization Agreement, s 3.5(e).
The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.
© McMillan LLP 2025
