The British Columbia government has been forced to cancel the privatization of a port subdivision of BC Rail's operation after it was revealed that the potential deal is part of a widening RCMP investigation involving the Crown-owned railway.

Transportation Minister Kevin Falcon said the deal was cancelled amid fears that advisers to one of the bidders for a 38-kilometre section of track that serves the giant Roberts Bank coal terminal south of Vancouver may have received confidential information that would have affected the government's ability to receive fair value for the assets being sold.

The decision to delay the deal comes after the RCMP raided the B.C. Legislature in December because investigators suspected that two key officials were offered or had taken bribes to trade in secret government information.

But the deal should not have an impact on the $1-billion sale of BC Rail's freight operations to Canadian National Railway, which is expected to close after a review by the Federal Competition Bureau, Mr. Falcon said. "I and the evaluation committee are confident the province accepted the best proposal for the BC Rail-CN partnership and did indeed receive fair value," he said.

The Roberts Bank line was being sold separately from BC Rail's main freight operations.

Yesterday's announcement comes only after the province was assured that the information being released would not jeopardize the continuing RCMP investigation, which follows the raid on the offices of David Basi and Bob Virk, former aides to Finance Minister Gary Collins and former transportation minister Judith Reid, respectively.

"We will not revisit the bidding process until the RCMP investigation is completed," Mr. Falcon said.

The province had planned to sell the subdivision for between $70-million and $100-million to three potential bidding groups, including CN, CP Rail and the Vancouver Port Authority; U.S. company Omnitrax and McQuarrie of Australia; or Southern Railway, which is owned by U.S. shipping magnate Dennis Washington.

However, Mr. Falcon said he was unable to name any of the advisers who may have been in possession of information that would have hindered the province's ability to get a fair price for its assets.

Last week, the Supreme Court of B.C. released vague details of an RCMP investigation that indicated that two key government officials may have been involved in a scheme to trade confidential information for bribes.

New Democratic Party Leader Carole James said the Liberals have consistently denied that police investigations have compromised government business, but now it's been forced to dump a deal.