I'll try to be as brief as I can on a multi-year journey.
I used to work at Rocky Mountain Railtours as vice-president of operations. Having negotiated track rate contracts with VIA Rail, CN, and CP, I had seen some agreements before. Without getting into any details, when I first arrived it seemed just excessively high. I had limited experience in it, frankly.
Our contracting is very important, but what contracts are we talking about? The first one was a crewing agreement, so it expired in the first five years. We renewed it. I would applaud Canadian Pacific for being very responsible. We got some significant reductions out of it, and we signed up that contract. It made sense, and it was reasonable for both parties.
In the case of the operating of the track rate agreement, it was very evident to me that it was excessive in terms of rates. If you used a typical long-run variable costing type of calculation, which is a fairly standard type of calculation, you were looking at a four-digit type of long-run variable cost or margin of contribution. The rates were extremely high. But if you compare them to the same type of calculation, using the same methodology, for other types of what the railways' average contribution is--as I said, they're less than 30%--using the same methodology, I got 30%, with something that has quite a number of digits added on to it.
As for the process we went through, we really tried to negotiate first, on multiple occasions. In fairness to the railway, there was a 20-year agreement in place, so why would they want to make the change? What I ultimately had to do was work to create the willingness not to go back and be retroactive, because that's not appropriate, but to correct a pricing change, as most people who have been in business have had to make pricing changes.
Pricing changes are not uncommon in business on a regular basis if something's out of whack. I have done them. I used to work in a multinational organization, and they're very common. You don't have to change the contract, you just change what is called the price sheet at the back.
So over quite a long period of time, I attempted to do it through an appropriate commercial negotiation, if that could happen. Of course it couldn't happen, so I then elected to go to the Greater Vancouver Regional District board of directors in camera and the TransLink board of directors in camera. I reviewed this with them all. It was a very emotional meeting, frankly, and there was great anger once they saw what the real economics looked like. I wasn't able to share it with anybody, because that was actually one of the challenges.
I was even requested to do an editorial board review with The Vancouver Sun and The Province. I couldn't tell them anything, let alone the Minister of Transport at the time, Minister Collenette, because it had confidentiality attached to it.
So I basically met with every mayor in the whole Lower Mainland, and basically every mayor and every regional authority signed up support for trying to make a correction to this. It was exhaustive and it was challenging. Each step along the way, I communicated to the railway in question what I was going to do, in hopes that I wouldn't have to do it. I proactively communicated, saying I didn't want to do this but was going to do it if we couldn't get together.
Ultimately it came down to excessive public pressure, and it was tied into some other things strategically. At the time, I thought we had a very unique, never to happen again window, with the sale of BC Rail that was going to go on, along with some other interests that they had beyond, frankly, a relatively small commuter rail operation. I had to strategically tie in to all of those leverage points.
Ultimately it ended up with the chief executive officer and president of CP Rail having to come in, and I applaud him. Rob Ritchie, who is now retired, deserves a tremendous amount of credit for starting to put a dent into getting to the right thing. Are we there today, where we need to be? Absolutely not, but I do applaud the CEO for making an appropriate acknowledgement.