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An evaluation of CP Rail’s proposed Beaver Tunnel

University of British Columbia

CP Rail is experiencing capacity constraints on its western mainline between Calgary, Alberta and Vancouver, B.C. The critical bottleneck has been identified as the Roger's Pass section, which is between Golden, B.C. and Revelstoke, B.C. CP Rail has examined several alternatives, and has concluded that this bottleneck can best be overcome by nineteen miles of doubletracking. This would require the construction of an eight-Mile tunnel under Roger's Pass. CP Rail's financial evaluation of this project reveals an unacceptably low rate of return on capital invested. This paper has two objectives, namely 1) to examine the potential conflict between the public desirability of the tunnel investment and the financial viability of the investment, and 2) regardless of the outcome of the first objective, to identify and analyze alternative methods of providing financial compensation to CP Rail so that it will proceed with the tunnel investment. The analysis concludes that potential benefits brought on by the construction of the tunnel may make this project desirable from a public point of view, even if it is established that the tunnel is not financially viable to CP Rail. The analysis of the alternative methods of providing financial compensation point out that user pay financing alternatives are preferable from an economic viewpoint, but the analysis concludes that time constraints are such that public financing alternatives are optimal.

Text

2010-03-15

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http://hdl.handle.net/2429/21886

Business Administration

University of British Columbia

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