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The Mysterious End of CN’s Wildfire Cost-Sharing Agreement with BC

The deal saved the company millions in big fire years. Both parties have been tight-lipped about why it ended.

Amanda Follett Hosgood 16 Dec

Amanda Follett Hosgood is The Tyee’s northern B.C. reporter. She lives in Wet’suwet’en territory. Find her on Twitter @amandajfollett.

Two wildfires start a decade apart.

Both are ignited by railway operations that throw sparks and hot metal fragments into the tinder-dry grass next to the tracks in southern B.C. In the first, which grows to 4,000 hectares, the province would eventually order Canadian National Railway to pay $16,000 for damages.

The next — despite growing to 2,200 hectares, roughly half the size of its predecessor — would cost the company more than $16 million.

As any wildfire expert will tell you, infinite variables determine the extent and cost of wildfire damage.

But in this case, one of the main factors in CN’s cost disparity was a 16-page document signed between B.C.’s Ministry of Forests and the Canadian National Railway in 2005 and abandoned by the railway company in 2013.

Titled simply “Fire Control and Cost Sharing Agreement,” it was an insurance policy of sorts. CN rail would pay upfront for a portion of the province’s wildfire prevention costs each year. In exchange, the province waived responsibility for costs incurred fighting fires caused by CN operations.

But details about why it ended or whether it could have made railway companies more accountable for wildfire management are as mysterious as the mythical phoenix.

The 'Fire Control and Cost Sharing Agreement,' signed in 2005 by BC’s Ministry of Forests and the Canadian National Railway. This copy was obtained through freedom of information laws.

“We heard nothing about it from either party,” Les Gyug says. “Nothing.”

Gyug is an Okanagan-based professional biologist and a former member of B.C.’s Forest Appeals Commission, which is tasked with reviewing provincial decisions related to forest resources, including wildfires. He has sat on Forest Appeals Commission panels both while the agreement was in effect and after it was dissolved. He says both parties were tight-lipped when he raised a question several years ago about what had become of the agreement.

In 2009, Gyug sat on a panel reviewing CN’s costs for Fire 135, which was caused by sparks from a dragging train brake near Ashcroft in 2005. The Ministry of Forests had originally ordered the company to pay just over $250,000 for the fire, an amount it determined was equivalent to 75 per cent of the timber value destroyed by the fires.

CN appealed the order.

It successfully argued that it shouldn’t pay the value of timber at the time of the fire, but rather the value of the wood when it was salvaged a year later at rock-bottom prices — the stumpage rate for the burned timber priced at less than two per cent of its original value.

CN’s costs for the fire were reduced dramatically, from the initial $250,000 to just over $6,000 for timber plus a $10,000 penalty.

But what was never in dispute was whether CN was responsible for $5.7 million the province spent fighting the fire. Because it occurred just months before the parties entered into the agreement, those costs were waived as a good-faith gesture by the province, something later noted by the Forest Appeals Commission.

“An agreement in principle regarding a fire control cost sharing agreement had been negotiated between CNR and the province at the time of the fire, and the Manager decided that the intent of the agreement in principle was broad enough to cover the fire control costs,” the panel said in its decision.

Instead, as it entered into the agreement that fall, CN paid the province an initial amount of $500,000 to cover the fiscal year ending March 31, 2006 — less than 10 per cent of the province’s firefighting costs for the single CN incident.

That’s why, several years later as he watched the parties haggle over costs for the 2015 Cisco Road fire — perhaps the costliest rail-caused fire in B.C.’s history — Gyug thought to raise the issue of the cost-sharing agreement.

“I actually said at one point, ‘I’ve heard nothing about this cost-sharing agreement that was apparently in place in 2009,’ and I heard nothing but silence in return,” he remembers. “Nobody was willing to say anything about it.”

Little has changed since.

The Tyee made multiple interview requests to both CN rail and B.C.’s Ministry of Forests to learn more about the agreement, the reasons it was cancelled and what replaced it for recouping wildfire costs from railway companies. Those interviews were never provided.

A copy of the agreement was obtained through freedom of information laws.

Signed by CN and B.C.’s Ministry of Forests on Oct. 13, 2005, the initial payment of $500,000 was due when the agreement came into effect. For the following fiscal year, beginning April 1, 2006, preparedness costs were set at $275,000. Under the agreement, they were not to exceed $382,500 in any subsequent year.

Going forward, annual payments would be based on a rolling 10-year average of the percentage of CN-caused wildfires in the province multiplied by B.C.’s total annual wildfire preparedness costs. Annual wildfire calculations were done within the calendar year and payments were due by April 30 each year.

“It’s pre-paying, if you like. In case they start a fire, then this will be their share of the costs,” Gyug says. “It’s more or less a type of insurance.”

The agreement was to be reviewed annually before March 1 and either party had the ability to terminate with written notice. CN chose not to renew in March 2013, both parties say.

So the company was no longer covered by that insurance policy when sparks from rail maintenance started the Cisco Road fire near Lytton in 2015. CN was ordered to pay more than $16 million, a figure that included more than $7 million in the costs of controlling the fire — an expense the province was no longer willing to waive.

In appealing the order, CN disputed its share of the fire control costs, requesting it be lowered to $3.2 million.

The appeal backfired.

Not only did the commission decline to reduce firefighting costs, it increased the total amount by nearly $350,000, the result of a previous calculating error. In total, CN was charged more than $16.6 million for the Cisco Road fire, according to the 2020 decision by the appeal commission. It may be the most expensive rail-caused wildfire in B.C.’s history — determinations are only made public if they are appealed.

Since the Cisco Road fire, the number of railway-caused wildfires has continued to rise dramatically.

Going back as far as 2010, according to the Transportation Safety Board (and even decades earlier, based on the National Forestry Database), the number of railway occurrences classified as “fires/explosions” along Canadian railway lines averaged about 30 each year.

In 2019, however, the TSB records show a spike in fire activity to 100 incidents that year. Although the number dropped slightly in 2020 to 76 — still well above previous years — 165 incidents had been recorded by end of September this year.

Brian Simpson, a wildfire consultant in Castlegar, B.C., says the province saw the risk of increasing fire activity as it began to negotiate cost-sharing agreements with industry nearly 20 years ago.

“Costs were now starting to skyrocket and, up to that point, a lot of the legislation was pretty vague. It was pretty tough to pursue costs and damages,” he says.

Simpson was working as the manager of operations in B.C.’s Forests Protection Branch when the agreement was signed in 2005 by its then-executive director — a position he would move into the following year and hold until his retirement in 2015. He played an instrumental role in the push to get industry more invested in wildfire prevention.

Big fire seasons were becoming increasingly common — 2003 was “off the scale,” Simpson says — and the goal was to engage industry in wildfire prevention while increasing the province’s fire preparedness budget.

The strategy echoed the old adage that an ounce of prevention is worth a pound of cure.

“There’s a direct relationship between your investment in prevention and preparedness… to your total cost management, with respect to suppression costs,” he says. “If you’re investing in prevention, then you can reduce your costs of reacting to the tragedies when they occur.”

Although efforts initially focused on the forest industry, Simpson says CN was an early adopter of the program. “They were keen to get on this and make it happen,” he remembers. In exchange for an annual contribution to fire prevention, the agreement would provide the railway company with increased certainty about its fire-related expenses.

The government was spending huge amounts of money in litigation over wildfire costs, a process that was exceedingly inefficient, Simpson says, with court cases sometimes dragging on for years.

“I don’t personally believe that litigation is the right tool. It’s labourious, it’s expensive and it often ends up with some negotiated agreement that’s 25 cents on the dollar and 10 years have passed,” he says.

While providing a framework for the province to recoup costs, the overriding purpose of the agreements was to prevent fires in the first place.

“The key factor was, especially for the forest industry, that if they were more careful and were more diligent around preventing fires from starting, they would be able to reduce the costs of their insurance through these agreements, with this rolling average,” Simpson says. “If they let that get out of control, then the increased costs would be captured, eventually, in the subsequent years’ costs.”

Although Simpson doesn’t know what happened to the agreement or why CN backed out, he speculates that low fire seasons in the years that followed the signing of the agreement may have lessened the financial motivation to continue.

But some fear the lack of an agreement could make industry less accountable and give incentive to deny responsibility for costly fires when they do occur.

Edith Loring-Kuhanga is a long-time Lytton resident who was displaced following the June 30 wildfire that swept through her community, destroying more than 90 per cent of the village and claiming the lives of two residents.

She believes big bills for causing wildfires could discourage railway companies from accepting responsibility.

Early speculation about the fire’s cause squarely pointed the finger at the railway running through the community. Eye witnesses reported seeing a train stopped on the tracks south of Lytton, one of its cars ablaze, about an hour before the fire was reported.

But when the Transportation Safety Board announced 10 days later it was investigating “a fire potentially involving a freight train in Lytton,” railway companies pushed back. On July 16, CP issued a statement blasting the TSB for its “irresponsible and misleading” comments about the fire.

“Clearly, at this preliminary stage, any conclusions or speculation regarding any cause of the Lytton fire or contribution factor is premature,” the company said. It downplayed the number of railway-caused fires as “not a significant cause of wildfires in B.C., contrary to media and government speculation.”

When the TSB announced last month that it had found no evidence that a train had started the Lytton Creek fire, residents expressed outrage and disbelief.

Loring-Kuhanga calls the investigation “a joke.”

“What a waste of time. I mean, they didn’t interview any witnesses,” she says. “Whenever you go to a scene of a motor vehicle accident, or any kind of accident scene, the first thing you do is interview the witnesses. They never interviewed anybody, except for the employees that were on the train.”

The RCMP and BC Wildfire Service continue to investigate, with no timeline provided for completion.

“The RCMP respects the importance of completing a thorough and comprehensive investigation, given the devastating impacts,” the force said in its most recent update on Oct. 14.

BC Wildfire Service suggested it’s unlikely to have answers before spring. “This investigation will take some time to complete to ensure it is done thoroughly,” information officer Taylor MacDonald wrote in an email.

Despite finding no evidence linking trains to the Lytton fire, the TSB said it initially had reasonable grounds to believe the fire was caused by “rolling stock” based on information from the BC Wildfire Service and RCMP when it sent an investigator to examine the site and take photos on July 9.

According to its report, the last train to travel through Lytton was owned by CP but was being operated by CN. It passed through the area at about 4:30 p.m., the report says, 18 minutes before the fire was reported.

But after speaking with railway companies, inspecting the train, meeting with wildfire-origin investigators and conducting interviews with railway employees, it found no evidence of “hot bearings, burnt brake heads, built-up tread, and other potential fire-creating causes.”

“The TSB investigation has not identified any link between railway operations and the fire,” it concluded.

When asked why it conducted a class 5 investigation, which is limited to data collection and is generally completed within 90 days, TSB media relations specialist Alexandre Fournier said in an email that “in the absence of a TSB-reportable occurrence, this fire is outside our jurisdiction.”

TSB-reportable occurrences are limited to rolling stock, he said. It’s unclear whether other railway activities not involving trains, such as track maintenance, were ruled out by the investigation.

A table outlining the six investigation types labels the class 5 level of effort as “low” with “little likelihood of identifying new safety lessons that will advance transportation safety.”

“A class 5 occurrence has little likelihood of identifying new safety lessons that will advance transportation safety,” the TSB says. “The occurrence may involve fatalities and/or serious injuries. There is little or no release of dangerous goods. There is minimal damage to property or the environment. The occurrence attracts limited public interest outside of the immediate area. The investigation is limited to data gathering and the data are recorded for statistical reporting and future analysis.”

But Fournier defended the investigation as comprehensive.

“The TSB has conducted significant work to determine if there was a definitive connection between railway operations through Lytton, B.C. and the fire that destroyed the town on June 30, 2021,” he said.

When asked about classification for the costly Cisco Road fire, Fournier said the board had no record of an investigation and reiterated that it would only have been reportable to the TSB if the fire were a result of rolling stock. The Cisco Road fire was caused by rail maintenance.

Vancouver-based lawyer Ryan Morasiewicz says determining responsibility for a fire — not to mention details like whether the company practised due diligence — is tricky with or without a cost-sharing agreement.

“I would assume it would be theoretically in the rail companies’, or anybody’s, interests to dispute the causation of any fires,” says Morasiewicz, whose practice focuses on commercial and insurance defence litigation.

“Whatever that agreement was, there had to have been, I would imagine, some mechanism for the two parties to agree which fires were and were not caused by the rail company, in which case you’re looking at the exact same thing that we’re talking about before the Forest Appeals Commission.”

CN’s costs under the agreement likely crept up over time.

It’s unknown how much the company paid B.C. during the seven years the agreement was in place. The province declined to provide annual amounts, directing The Tyee back to the freedom of information process. A response isn’t expected until well into the new year.

But the agreement didn’t count fire-preparedness costs in the years leading up to its introduction in 2005. Simpson says that was based on plans for more accurate reporting moving forward and to encourage companies to sign on.

Because their costs were based on a 10-year rolling average, it meant that with each passing season industry costs would increase.

“We wanted it to be able to withstand any level of scrutiny, so it was seen as being fair — or even more than fair — at least in the early days,” he says.

Although it declined an interview request, CN said in an emailed statement that it has a robust plan to mitigate wildfire risks.

“The agreement you are referring to between the Province of British Columbia and CN came to an end in 2013 and it was decided at the time not to renew,” senior media relations advisor Mathieu Gaudreault wrote. “However, CN continues to act in a manner consistent with the intent of the agreement to prevent fires and support the province’s firefighting efforts.”

Gaudreault said that includes abiding by strict regulations in collaboration with the B.C. government and contributing to suppression costs for fires it may have started.

Canadian Pacific Railway, Canada’s second-largest railway operator, has never signed a cost-sharing agreement with the province, according to both the company and the province.

While Simpson says the model may not have been perfect, it was a step in the right direction and something to build on over time.

“In the end, we wanted to reduce these fire starts. We wanted somehow to internalize that commitment and make it a priority for industry to do more,” he says.

“The basic principles remain today — I don’t care what model they have in place — and that is, how do you incentivize industry to do everything possible to prevent fires and be able to suppress them when they do cause a fire?”  [Tyee]

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