CTA Home : Rulings : Decisions : 1991
Decision No. 52-R-1991
February 4, 1991
IN THE MATTER OF a reconsideration pursuant to section 171 of the National Transportation Act, 1987,
R.S.C., 1985, c. 28 (3rd Supp.) of applications by the Canadian National Railway Company for authority to
abandon the operation of the Kincardine Subdivision from Listowel (mileage 1.41) to Wingham (mileage
30.34), the Newton Subdivision from Stratford (mileage 1.17) to Palmerston (mileage 36.62) including
1.41 miles of the Kincardine, and the Owen Sound Subdivision from Palmerston (mileage 0.00) to Owen
Sound (mileage 71.43), (hereinafter the branch lines) a total distance of 137.22 miles, all in the Province of
Ontario.
File Nos. 6115/492
6115/565
6115/583
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INTRODUCTION
On September 3, 1980, the Canadian National Railway Company (hereinafter the applicant) applied to the
Railway Transport Committee of the Canadian Transport Commission (hereinafter the RTC) for authority
to abandon the operation of the Kincardine Subdivision from Listowel (mileage 1.41) to Kincardine
(mileage 57.82). By RTC Order No. R-35400 dated July 25, 1983, the operation of the Kincardine
Subdivision was ordered abandoned from Wingham (mileage 32.95) to Kincardine (mileage 57.82) and
was ordered continued between Listowel (mileage 1.41) and Wingham (mileage 32.95) (amended to
mileage 30.34 by RTC Order No. R-36558 dated April 24, 1984). The application was again reconsidered
in 1988 under the provisions of the National Transportation Act, 1987 (hereinafter the NTA, 1987) and the
operation of the Kincardine Subdivision was ordered continued between Listowel (mileage 1.41) and
Wingham (mileage 30.34) pursuant to Order No. 1989-R-24 dated February 13, 1989.
On September 15, 1986, the applicant applied for authority to abandon the operation of the Newton
Subdivision from Stratford (mileage 1.17) to Palmerston (mileage 36.62) as well as the entire length of the
Owen Sound Subdivision from Palmerston (mileage 0.00) to Owen Sound (mileage 71.43) and the
Kincardine Subdivision from mileage 0.00, the junction with the Newton Subdivision mileage 27.85 at
Listowel, to mileage 1.41. The applicant retained in operation the Newton Subdivision from mileage 0.09
to mileage 1.17 in order to accommodate customers at Stratford.
By RTC Order No. R-40466 dated March 26, 1987, the operation of the Newton and Owen Sound was
ordered continued.
With the proclamation of the NTA, 1987, the Newton and Owen Sound applications were deemed to have
been made in accordance with the provisions of section 171 of the NTA, 1987. As the operation of these
lines had been ordered continued under subsection 254(5) of the Railway Act, R.S.C., 1970, c. R-2, the
National Transportation Agency (hereinafter the Agency) was required to reconsider these applications
under subsection 171(4) and to apply sections 161 to 171 and sections 173 and 174 accordingly.
LOCATION OF THE BRANCH LINES
These three branch lines are located in what is known as the Grey-Bruce region of Mid-Western Ontario
bordering Lake Huron to the West and Georgian Bay to the Northeast.
The Kincardine Subdivision begins at mile 27.9 off the Newton Subdivision of the applicant at the station
of Listowel situated at mile 0.00. From Listowel, it extends in a general northwest direction to Wingham at
mileage 30.34.
The Newton Subdivision serves as the connecting branch line between the Kincardine Subdivision and the
mainline Guelph Subdivision. It also serves as the connecting line for the Owen Sound Subdivision.
The Owen Sound Subdivision of the applicant commences at Palmerston and continues in a northerly
direction to Owen Sound at mileage 71.43.
A map of the area is attached as Appendix A.
CARLOAD FREIGHT TRAFFIC
Carload traffic on these branch lines consists mainly of lumber, wheat and flour. Traffic being handled for
the prescribed financial years of 1987, 1988 and 1989 is as follows:
Subdivision 1987 1988 1989
Kincardine 135 111 134
Newton 39 28 52
Owen Sound 498 340 44
ACTUAL LOSSES
On July 31, 1990, the Agency issued a Notice of Reconsideration pertaining to the operation of the branch
lines. Pursuant to this Notice, a significant number of submissions were received in opposition to the
proposed abandonment.
Where an application is opposed under section 161 of the NTA, 1987, section 163 of the NTA, 1987
requires the Agency to determine the amount of the actual loss, if any, of the railway company attributable
to the operation of the branch lines in each of the prescribed financial years and to cause public notice of
the determination made and of the principal factors applied in making that determination. In a Notice dated
November 26, 1990, the Agency published an interim determination of the amounts of the actual losses
incurred by the applicant in the operation of the branch lines during 1987, 1988 and 1989, based on
information submitted by the applicant. The costs calculated by the applicant were based upon the costing
methodology arising from the Decisions on the CN Chapais and Chester abandonment applications, as were
the determinations of the Agency in these cases. The notice of the Agency invited anyone who could
provide the Agency with documented evidence establishing that there is a reasonable probability of the
branch line becoming economic in the foreseeable future or that the operation of the branch line is required
in the public interest to provide such evidence to the Agency within fifteen (15) days from the date of the
Notice. In response to this Notice, further submissions were filed with the Agency.
Pursuant to section 164 of the NTA, 1987, the Agency is required to determine whether the branch line is
economic or uneconomic and, if uneconomic, whether there is a reasonable probability of its becoming
economic in the foreseeable future. Should the Agency find that the branch line is uneconomic and that
there is no reasonable probability of its becoming economic in the foreseeable future, subsection 165(1) of
the NTA, 1987 requires the Agency to order that its operation be abandoned. If the Agency determines that
the operation of the branch line is economic or that, although the branch line is uneconomic, there is a
reasonable probability of its becoming economic in the foreseeable future, the Agency still must order that
its operation be abandoned unless it determines that the operation of the branch line is required in the
public interest as set out in section 166 and as further defined in section 167 of the NTA, 1987.
As no evidence was filed with the Agency which would result in an adjustment to the determined amounts,
in accordance with the provisions of the Railway Costing Regulations, SOR/80-310 and section 157 of the
NTA, 1987, the interim determination of actual loss is determined to be final.
Subdivision 1987 1988 1989
$ $ $
Kincardine
Total Costs 476,808 492,201 515,397
Revenues 456,023 362,533 407,963
"Actual Loss" 20,785 129,668 107,434
Newton
Total Costs 177,531 140,937 200,272
Revenues 149,265 119,541 190,381
"Actual Loss" 28,266 21,396 9,891
Owen Sound
Total Costs 2,058,960 1,650,521 645,819
Revenues 1,560,731 1,182,437 195,776
"Actual Loss" 498,229 468,084 450,043
ECONOMIC DETERMINATION
Having determined that the operation of these branch lines incurred actual losses in the prescribed financial
years, the Agency is required to determine if these branch lines are economic or uneconomic, and if
uneconomic, whether there is a reasonable probability of their becoming economic in the foreseeable
future.
With the exception of the Owen Sound Subdivision, carload traffic being handled on the branch lines has
increased from 1988 to 1989; however, the cost of operating these branch lines has also increased. With
respect to the Owen Sound Subdivision, carload traffic has declined significantly as has the corresponding
costs. Train service on the branch lines is on an "as and when required" basis. As such, operating costs are
being kept to a minimum. Despite this level of train service in the case at bar, the operation of the branch
lines has continued to experience actual losses in each year. Therefore, the Agency must conclude that
these branch lines are uneconomic.
As the Agency has determined that these branch lines are uneconomic, it must establish whether there is a
reasonable probability of their becoming economic in the foreseeable future.
PROBABILITY OF BECOMING ECONOMIC
Premdor Inc. (hereinafter Premdor) is situated on the Kincardine Subdivision at Wingham. In its
submission, Premdor indicated that, in October of 1989, it acquired Century Wood Door Limited. Premdor
stated:
Under normal circumstances, that acquisition would have expanded production at Premdor's Wingham
facility by at least 40%, i.e. an additional 40 to 45 carloads would be generated in normal economic
circumstances. (Such increase will not be experienced in 1990 due to the recent downturn in the economy
in general and the housing construction industry in particular. In fact, Premdor's volume in 1990 will be
below that for 1989. However, Premdor submits that the Agency should not be influenced by a short-term
effect of the business cycle).
While the Agency recognizes that the country is officially in an economic recession, this reason on its own
merits cannot be used as justification for determining whether the branch line could become economic. If
indeed it was, situations would arise whereupon branch lines would be demonstrating a declining trend in
traffic, yet interveners would object to their abandonment claiming the decline was attributable to the
economic climate rather than the business or economic position of the intervener. In the case at bar,
however, traffic base of Premdor has been relatively constant over the years and the Agency is of the view
that finding that Premdor's indication of declining traffic at present should not be held against it in this
instance.
The Newton Subdivision serves as a connecting link to the Kincardine as well as the Owen Sound
Subdivision. As such, the operation of the branch line must be continued if the Agency determines that rail
service to either the Kincardine or Owen Sound Subdivisions is warranted. Abandonment of the Newton
Subdivision otherwise would result in a defacto abandonment of the Kincardine and Owen Sound
Subdivisions which is segmentation. As the applicant has indicated by its own evidence, segmentation is
contrary to the Main Line/Branch Line and Chapais Decisions.
Carload traffic on the Owen Sound Subdivision has been declining from 1987 to 1989. The Bruce Energy
Centre Limited (hereinafter Bruce Energy Centre) and Canadian Agra Holdings Incorporated presented
evidence that significant potential rail traffic could be generated to and from the Bruce Energy Centre
which is situated near Douglas Point. It submitted that, by 1992-1993, potential volumes of approximately
17,500 carloads (1,500 carloads alfalfa cubes, 7,200 carloads of canola, 6,600 carloads of canola meal/oil,
2,200 carloads of alcohol/corn meal/related products) could be available to the applicant and a further 2,750
carloads being generated by a proposed chemical plant. The submission indicated that much of the
production of Bruce Energy Centre would be destined to "Vancouver for export to Japan, Southeastern
United States, and Montreal and Halifax for export to the Middle East and Europe.". The Agency notes that
the stations of Chesley and Tara on the Owen Sound Subdivision are only approximately 13 to 20 miles
away from the Bruce Energy Centre. Traffic volumes of this magnitude must be taken into consideration.
The Agency recognizes that this carload is speculative in nature at present. Such long-haul traffic, when it
materializes in 1992, could be very profitable to the applicant.
The main shipper on the branch line is Parrish & Heimbecker. New Life Mills Limited (hereinafter New
Life) a division of Parrish & Heimbecker, operates a flour mill on the branch line at Hanover. In its
submission, New Life indicated that it ships approximately 40,000 tonnes of flour annually to domestic
markets and off-shore markets via the ports of Montr�al and Halifax. In addition, Parrish & Heimbecker
own and operate the Great Lakes Elevator Company Limited situated on the trackage of the applicant at
Owen Sound. Inbound wheat originates from Thunder Bay and is unloaded from a lake vessel into the
elevator during navigation season. During a period of 4 months when this mode is unavailable, New Life
submitted that its operation would be more efficient if the wheat could be sent directly by rail from
Thunder Bay to its Hanover mill. New Life asserted that this was not possible at present on account of the
high rates being quoted by the applicant to handle the traffic. As the evidence indicated, New Life instituted
a final offer arbitration procedure with the applicant in 1990 and obtained a freight rate with the applicant
for movements originating out of the Hanover Mill. Consequently, this may encourage an increase in traffic
in the foreseeable future.
Speare Seeds, also situated on the Owen Sound Subdivision at Harriston, indicated that it was in the
process of bringing in ten hopper cars of seed from northern Alberta for processing and furtherance on the
export market. The company stated that it expected this type of traffic to become regular, and as such,
installation of two more storage bins had been carried out. Speare Seeds indicated that is was not feasible to
move this seed by truck.
Interventions were also received from the Ministry of Transportation, and the Ministry of Industry, Trade
and Technology of the Province of Ontario, as well as various towns, municipalities and individuals.
After consideration of all the submissions received, the Agency has determined that there is a reasonable
probability of the operation of these branch lines becoming economic in the foreseeable future. The Agency
still must order the abandonment of the operation of these branch lines unless it determines that their
operation is required in the public interest. In making the public interest determination, the Agency shall
consider all matters that in its opinion are relevant to the public interest, including those matters
enumerated in section 167 of the NTA, 1987.
Actual losses on the Kincardine and Newton Subdivisions in the last prescribed financial year of 1989
amount to only $117,325. As previously noted, the Agency has determined that although current traffic
volumes may be less than previously forecasted by the shippers on these two branch lines given the traffic
potential presented by the interveners, the Agency is of the opinion that the carload traffic pattern will
reverse itself in the foreseeable future. The Kincardine traffic has been consistent over the years and there
is a significant probability of traffic growth in the near future. Therefore the Agency has determined that it
is in the public interest to order the continued operation of the Kincardine and Newton Subdivisions.
Losses on the Owen Sound Subdivision were $450,043 in 1989. While this amount may appear to be
significant, the Agency has also determined that the potential traffic which may originate and terminate in
the area in the foreseeable future merits a chance to materialize. Should this traffic base develop, the
benefits for the communities in the area alone justify retention of rail service.
AWARDING OF COSTS
On September 17, 1990, New Life filed with the Agency a Notice of Motion requesting that the Agency
order the applicant to disclose certain documents to enable it to make a meaningful opposition to the
reconsiderations of the applications and that New Life be awarded the costs of the Notice of Motion given
the unjustified refusal of the applicant to provide New Life with the information.
With respect to the issue of awarding of costs, the Agency has complete discretion to deal with the matter.
Furthermore, each case is decided on its own merits.
By letter dated October 23, 1990, the Agency advised New Life that it would not order the applicant to
produce the documents as New Life had failed to demonstrate how it would use the information in order to
assist the Agency in its deliberation of the cases.
Accordingly, the Agency determines that the request for the awarding of costs with respect to this matter is
dismissed.
CONCLUSIONS
Accordingly, after consideration of the evidence before it, the Agency hereby determines that these branch
lines are uneconomic; however, as there is reasonable probability of the branch lines becoming economic in
the foreseeable future their operation is required in the public interest.
The Agency has made these determinations in accordance with section 166 of the NTA, 1987 and therefore
concludes that the operation of the Kincardine Subdivision from Listowel (mileage 1.41) to Wingham
(mileage 30.34), the Newton Subdivision from Stratford (mileage 1.17) to Palmerston (mileage 36.62)
including 1.41 miles of the Kincardine, and the Owen Sound Subdivision from Palmerston (mileage 0.00)
to Owen Sound (mileage 71.43), a total distance of 137.22 miles, all in the Province of Ontario, shall not be
abandoned.
The operation of the branch lines shall be continued for a period of at least one year from the date of the
Order at which time the applications are to be reconsidered in accordance with section 171 of the NTA,
1987.
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