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BRIEFING NOTE
REGARDING: PREPARED FOR: PKI:PARED ON: PHI-;INZED B\,:

BCR GARY RENNICK FRASER & MACKAY JUNE 24,2003 BRIAN KIERAN & ERIK BORNMAN PILOTHOIJSE I JAFFAIRS PI~ C GROUP PHONE: 250-361-8218 FAX: 250-361-1211
EMAII,:
KIERAN@PILOTHOIJSE.CA

The provincial cabinet met on June 18* and received an update on the federalprovincial jurisdiction over BC Rail in the event its amalgamation into a national rail network or preservation as a regonal carrier. The Minister of Transportation, Judith Reid, made the presentation. The Ministers presentation was clearly designed to downplay the negatives of a transfer of jurisdiction to the federal government. At that meeting two cabinet ministers spoke out against the Minister of Transportations presentation: Minister of Education & Deputy Premier, Christy Clark, and Attorney General, Geoff Plant. The Minister of Education & Deputy Premier was the most vocal member of cabinet, asserting that the Minister of Transportations presentation seemed biased in favour of CN. The Minister of Transportation responded weakly to this assertion, simply reiterating the need to maximize the value of the asset to the province. She hrther suggested that retained provincial jurisdiction over BC Rail would devalue the asset. The Attorney General entered the exchange at that point to accuse the Minister of Transportation of providing a one-sided presentation. Subsequent to the Attorney Generals comments the issue was put off for further discussion at a future cabinet meeting. The Ministers of Finance, Advanced Education, Competition, Science & Enterprise and the Premier were all silent throughout this exchange. The next substantial cabinet discussion of BCR will likely take place June 23* when the selection of a government negotiating team will be discussed. The BCR Evaluation Committee met on Thursday, June 19* in Vancouver to discuss next steps. Assistant Deputy Minister Chris Trumpy allegedly reported to the committee that CN had been reported to be discouraginghntimidating other possible bidders, in particular BNSF, from participating in the bidding process for BCR. BCR Vice President Kevin Mahoney reported that Gary Rennick from OmniTRAX had reported that the COFI Transportation Committee (Shippers) had discussed this very matter at its Whistler Conference, which was taking place that
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day. A general commitment was made by the Evaluation Committee to investigate the truth of these reports and Borden Ladner Gervais was directed to examine possible courses of action. No specific actions were discussed. The BCR Evaluation Committee was also reported to have reviewed options pertaining to the structuring of the tax pool in the bid. Borden Ladner Gervais lawyer Robert Kopstein has been leading this process and it was reported that he had been discussing options with both Macquarie and OmniTRAX. A Korean expert in this area was reported to be joining the project team to assist in this endeavour. Much of the discussion centred on the possible levelling of the playing field? achieved by separating the tax pools fiom the asset. It was recognized that the government would be able to retain the tax pools for other use if it retained ownership of the asset, as would be the case in a lease or P3 scenario. It was also mentioned that the Pattison Group could take advantage of the BCR tax pools without purchasing the asset and may be interested in doing just that. The shippers have also become more active with four of the largest shippers: Canfor, West Fraser, Slocan and Weldwood all submitting letters to the BC Government expressing an interest in a continuing role in the progress of the Evaluation Committee. The members of the Evaluation Committee have been charged with ensuring that the shippers interests are protected through out the sale process and the members of the committee appear genuinely interested in meeting that objective. The committee did discuss the possibility of retaining the services of Mike Trethaway, a known government consultant, to get perspective on the shippers position.
NEXTSTEPS

OMNITRAX-BNSF MOLJ
CIBC World Markets will not permit a formal announcement of the OmniTRAXBNSF MOU. Supporters at arms length fiom the OmniTRAX team will spread the word on our behalf primarily by word of mouth.

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BRIEFINGS KEY NORTHERN OF STAKEHOLDERS & SHIPPERS

Key northern stakeholders must be briefed on the existence of the MOU and the good news vision OmniTRAX and BNSF share for the fhture of BCR. Given the restraints of the RFP process this will have to be conducted by allies not formally connected to either entity.
BACKGROUNDER T H E OMNITRAX-BNSFVISION FOR BCR ON

A backgrounder document needs to be quickly developed that outlines the essential ingredients of the MOU and our joint vision for BCR. This backgrounder can be an un-attributed handout to key stakeholders and find its way to the media.

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