BC Rail Reporting marks: PGE, BCOL, BCIT

BC Rail was a provincially owned regional railway, operated by the BC government from 1918 to 2004. At its height, it boasted 2,320 km (1,440 mi) of track and was the third largest railway in Canada.

The railway got its start in 1912 as the Pacific Great Eastern Railway (PGE). The original plan called for a line running from Vancouver to Prince George, where it would connect with the newly built Grand Trunk Pacific Railway (GTP). Also included was an agreement to provide the GTP with much-needed running rights to Vancouver. To raise cash the railway issued bonds, guaranteed by the provincial government at a rate of 4 to 4.5 per cent.

By 1915 the company was in serious financial trouble. After the railway defaulted on making interest payments to the bondholders, the government was forced to step in, as per its guarantee, and cover the shortfall.

By the time the 1916 election rolled around, the situation had grown far worse. After the underdog Liberals suggested that some of the bond payment advances had found their way into Conservative party coffers, the governing Conservatives were defeated and replaced with the Liberals. The new government then sued the backers for $5 million. In 1918, they reached a settlement that gave the government $1.1 million and ownership of the railway. For the next 30 years, the government was saddled with a railway it didn't want.

The railway was comprised of two separate sections of track, one between North Vancouver and Horseshoe Bay and a second between Squamish and Clinton. Also in place was an agreement to provide passenger service to West Vancouver. That lasted until 1928. From then on the railway languished. Its main purpose was to connect the logging and mining operations in the interior to the ports in Squamish.

Following the end of World War II, the government had a change of heart. Between 1949 and 1971, they embarked on a rapid expansion plan that included the opening of a line in 1952 to connect with Canadian National (CN) at Prince George, and the extension of service to Fort St. John and Dawson Creek in 1958. Other developments included a spur to Mackenzie, a third line to Fort St. James and an extension to Fort Nelson, which brought the railway 160 km south of the Yukon by 1971. In 1972, the railway's name was changed to British Columbia Railway (BCR).

Although the railway's main purpose was to carry freight, passenger service was offered in a few communities. In 1974, the railway expanded into the tourism industry with the Royal Hudson, a restored locomotive, built in 1940 and leased from the provincial government.

By 1977, cracks were beginning to show in the railway's industrial strategy. An inquiry was called after construction was halted on the Dease Lake line. The line, which was to built to service the copper and asbestos mines in the area, ran into serious cost overruns during construction. The railway also found itself embroiled in a nasty little lawsuit with the contractors, who alleged they were deliberately misinformed as to the amount of work involved so the railway could obtain lowball bids. Since demand for both commodities was in decline, questions were also raised on the line's potential for profitability.

New problems arose with the construction of the Tumbler Ridge Subdivision. The small electrified line was built in 1983 to service two coal mines, the Bullmoose and the Quintette, in the Prince George area. Unfortunately traffic was not sufficient to warrant the costs of construction.

Reorganization of BCR led to yet another name change in 1984. Following restructuring, the railway became known as BC Rail. That same year the railway made another acquisition, the British Columbia Harbours Board Railway, that later became a hotbed of controversy. Harbours Board was a strategically important short line that gave CN, the CPR and Burlington Northern (later BNSF) access to the Roberts Bank Terminal, a huge coal shipping facility.

By the early 1990s, BC Rail was in serious difficulty. Failed expansions combined with reduced subsidies and money-losing contractual obligations led to massive increases in the railway's debt load. The railway attempted to turn things around by branching out into shipping. However the closure of several mines resulted in a further loss of revenue and by 2003, the railway was forced to sell the bulk of its shipping operations with the exception of the Vancouver Wharves.

Passenger service was never a large part of BC Rail's operations. Service cutbacks actually started back in the 1960s. In 2002, passenger service was completely cancelled along with the popular excursion services including the Royal Hudson. The excursion services were later leased to a private operator with the exception of the Royal Hudson which is now operated as a heritage railway by a non-profit group, the West Coast Railway Association.

The plug was finally pulled in 2003 when the government announced the sale of all operations and assets with the exception of the rail right-of-way. The sale was riddled with controversy. During the previous election, Premier Gordon Campbell had made a commitment not to sell the railway. Critics denounced the sale, claiming the railway had been deliberately under-funded. Six months after the announcement, the government accepted a bid from the (CN).

During the investigation that followed, it was revealed that both the CPR and BNSF had dropped out of the bidding process to purchase BC Rail due to "blatant favouritism" towards CN. In an ironic twist of fate it was later revealed that CN contributed $172,410 to the Liberal party following the sale.

In a further development that led to criminal proceedings two government employees, David Basi and Bob Virk, were accused of accepting a bribe from Erik Bornmann, an OmniTRAX lobbyist. Bornmann later plea-bargained in exchange for immunity from prosecution. Proceedings dragged on until 2010 when both men pleaded guilty to lesser charges.

As a result of the court proceedings, the Vancouver Wharves, including the Port Subdivision that provided access to Roberts Bank, were not part of the sale and remain under the ownership of BC Rail.

BC Rail finished off its days in tatters and ruins, the victim of poor management, bungled planning and a sell-off tainted with corruption. Many unanswered questions still linger over the government's handling of the sale. To this day, the details remain shrouded in secrecy. Interestingly, CN has reportedly averaged $25 million per year in profits from the line since the takeover.