CTA Home : Rulings : Decisions : 1995
Decision No. 155-R-1995
April 4, 1995
IN THE MATTER OF an application made pursuant to section 160 of the National Transportation Act,
1987, R.S.C., 1985, c. 28 (3rd Supp.), by the Canadian National Railway Company for authority to
abandon the operation of the segment of the Newton Subdivision from Stratford (mileage 1.17) to
Palmerston (mileage 36.62), including 1.41 miles of the Kincardine Subdivision, and the segment of the
Owen Sound Subdivision from Palmerston (mileage 0.00) to Owen Sound (mileage 71.43), a total distance
of 108.29 miles, in the province of Ontario.
IN THE MATTER OF a reconsideration pursuant to section 171 of the National Transportation Act, 1987
of the part of the application pertaining to the abandonment of the operation of the segment of the Newton
Subdivision from Stratford (mileage 1.17) to Palmerston (mileage 36.62) and the segment of the Owen
Sound Subdivision from Palmerston (mileage 0.00) to Harriston (mileage 9.43), a total distance of 44.88
miles, in the province of Ontario.
File Nos. T 6115/565
T 6115/583
--------------------------------------------------------------------------------
BACKGROUND
On September 15, 1986, the Canadian National Railway Company (hereinafter CN) applied to the Railway
Transport Committee of the Canadian Transport Commission (hereinafter the RTC) for authority to
abandon the operation of the Newton Subdivision from Stratford (mileage 1.17) to Palmerston (mileage
36.62), the Owen Sound Subdivision from Palmerston (mileage 0.00) to Owen Sound (mileage 71.43), and
the Kincardine Subdivision from mileage 0.00, being the junction with the Newton Subdivision at Listowel
(mileage 27.85), to mileage 1.41.
By Order No. R-40466 dated March 26, 1987, the operation of the aforementioned railway lines was
ordered continued. The National Transportation Agency of Canada (hereinafter the Agency) was required
to reconsider the application under subsection 171(4) of the National Transportation Act, 1987 (hereinafter
the NTA, 1987). On February 4, 1991, the Agency issued Order No. 1991-R-58 which ordered CN not to
abandon the operation of the said railway lines for a period of one year, after which time the application
would be reconsidered.
On April 3, 1992, the Agency issued a public notice that it was reconsidering the CN application. As
opposition was received, the Agency published an interim determination of the actual losses on July 3,
1992.
On October 9, 1992, the Canadian Agra Corporation (hereinafter Canadian Agra), through the Bruce
Energy Centre Limited (hereinafter the Bruce Energy Centre), and CN requested the Agency to defer
issuing an order respecting the portion of the Newton Subdivision from Stratford (mileage 1.17) to
Palmerston (mileage 36.62) and the portion of the Owen Sound Subdivision from Palmerston (mileage
0.00) to Harriston (mileage 9.43) until September 30, 1993, in order to allow them to finalize agreements
for the sale of the said trackage. On October 14, 1992, the Agency acknowledged the agreement of CN to
extend the date for the issuance of an Agency decision. The Agency revised its reconsideration of the
original application and invited all interested parties to file comments on the economic viability of the
remainder of the railway lines, namely the Owen Sound Subdivision from Harriston (mileage 9.43) to
Owen Sound (mileage 71.43) and the Kincardine Subdivision from mileage 0.00 to mileage 1.41.
On September 15, 1993, the Agency acknowledged the request by Canadian Agra and CN for a further
extension of time to September 30, 1994, in order for them to complete the agreements for the
aforementioned sale.
On September 30, 1993, Agency Order No. 1993-R-303 and Decision No. 674-R-1993 authorized CN to
abandon the operation of the Owen Sound Subdivision from Harriston (mileage 9.43) to Owen Sound
(mileage 71.43), as well as the 1.41 mile segment of the Kincardine Subdivision.
On August 29, 1994, Canadian Agra, on behalf of the Bruce Energy Centre, withdrew the application it had
filed pursuant to the provisions of section 174 of the NTA, 1987.
Therefore, it is now necessary to reconsider the remainder of the original application by assessing the
economic viability of the Newton Subdivision from Stratford (mileage 1.17) to Palmerston (mileage 36.62)
and the Owen Sound Subdivision from Palmerston (mileage 0.00) to Harriston (mileage 9.43) (hereinafter
the branch line).
LEGISLATIVE PROVISIONS
In accordance with section 161 of the NTA, 1987, any person may oppose an application for the
abandonment of a branch line by filing with the Agency, not more than sixty (60) days after the notice of
application, a written statement setting forth the grounds on which that person opposes the application. If
no opposition is received, the Agency must order the operation of the branch line abandoned.
Where an application is opposed, the Agency is required to determine whether a 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 the abandonment of its operation.
If the Agency determines that a branch line is economic or that, where it is uneconomic, there is a
reasonable probability of its becoming economic in the foreseeable future, the Agency must still order the
abandonment of the operation of the branch line, unless it determines that the operation of the branch line is
required in the public interest, as set out in section 166 of the NTA, 1987 and as further defined in section
167 of the NTA, 1987.
LOCATION OF THE BRANCH LINE
The branch line is situated in the Grey-Bruce Region of Mid-Western Ontario. The Newton Subdivision
begins at Stratford (mileage 0.00) and extends in a northerly direction to Palmerston (mileage 36.62). The
Owen Sound Subdivision originates at Palmerston (mileage 0.00) and extends 9.43 miles in a northerly
direction to Harriston.
A map of the area is attached as Appendix 1.
CARLOAD TRAFFIC
Traffic handled for the prescribed financial years of 1991, 1992 and 1993 is as follows:
CN Newton/Owen Sound Subdivisions
Stations 1991 1992 1993
In Out In Out In Out
Brunner - 1 - - - -
Listowel 2 - 3 - 1 -
Harriston 21 - 11 - 14 -
24 14 15
EVIDENCE SUBMITTED
In response to the Agency Notice of Reconsideration issued on April 3, 1992, Canadian Agra filed its
opposition to the proposed abandonment of the operation of the Newton Subdivision from Stratford
(mileage 1.17) to Palmerston (mileage 36.62), including the 1.41 mile segment of the Kincardine
Subdivision, and the Owen Sound Subdivision from Palmerston (mileage 0.00) to Owen Sound (mileage
71.43), a total distance of 108.29 miles, in the province of Ontario.
When Canadian Agra, through the Bruce Energy Centre, reached an agreement in principle with CN to
purchase the Newton Subdivision (from mileage 1.17 to mileage 36.62) and the Owen Sound Subdivision
(from mileage 0.00 to mileage 9.43), it withdrew its opposition to the abandonment of the remainder of the
railway lines.
Canadian Agra submitted that significant rail traffic would be generated from the Bruce Energy Centre in
the foreseeable future. It estimated that some 17,420 carloads of traffic could be generated carrying alfalfa
cubes, canola seed, canola meal and oil, alcohol and corn meal, and canned vegetable products.
On August 29, 1994, Canadian Agra, on behalf of the Bruce Energy Centre, withdrew its offer to purchase
the branch line pursuant to the provisions of section 174 of the NTA, 1987. At the same time, it withdrew
its opposition to the abandonment of the operation of the branch line.
On November 4, 1994, the Agency published an interim determination of the amounts of actual loss
incurred by CN in the operation of the branch line.
Integrated Energy Development Corporation (hereinafter IEDC), one of the two industrial developers of the
Bruce Energy Centre, filed an objection to the proposed abandonment on the grounds that there is a
reasonable probability of the branch line becoming economic in the foreseeable future. IEDC stated that a
steam agreement with Ontario Hydro had been finalized at the end of July 1994. Further, both IEDC and
Ontario Hydro have executed a Memorandum of Understanding and subsequently contracted a review of
the process technologies. According to IEDC, rail service is crucial for the shipping of products.
IEDC stated that, together with information provided by Canadian Agra, it anticipated an aggregate
demand of 25,420 carloads per year commencing in 1997. This would include transportation fuels such as
ethanol and methanol.
Should the Agency rule against retaining the rail service, IEDC sought consideration for the delay of the
abandonment pursuant to paragraph 172(2)b) of the NTA, 1987, in order to negotiate with the Province of
Ontario for defraying the losses incurred by CN in the operation of the branch line.
Speare Seeds, a shipper located at Harriston, filed an objection to the abandonment of the operation of the
branch line and submitted that the branch line was important to its business, as there was no other method
of moving the quantity of seed as economically. Speare Seeds submitted that it intended to increase the
number of carloads per year.
In response to the submissions filed subsequent to the Agency's interim determination of actual losses, CN
submitted that carload traffic has been almost non-existent for the years 1991, 1992 and 1993. Having
received, on average, 12 carloads per year at Harriston, CN is of the view that Speare Seeds could take
delivery at an alternate rail station such as Kitchener, a distance of 46 miles from Harriston.
Although a number of other submissions were filed, CN noted that, except for IEDC, there were no firm
commitments for additional carload traffic which could make the branch line economic.
With respect to the intervention of IEDC, CN submitted that over half of the projected carloads of IEDC
are related to the canola crushing project of Canadian Agra. According to CN, if "Canadian Agra believed
that this project had a continuing "reasonable probability of ... becoming economic in the foreseeable
future," they would not have terminated the deal with CN and Railtex".
As for the carload projections of IEDC relating to transportation fuels, CN contends that "if there were any
"reasonable probability" of ... this water to gas scheme ... " becoming economic in the foreseeable future",
then Ontario Hydro would have quickly stepped in Canadian Agra's shoes in their deal with CN and
Railtex".
CN further stated that it had received no indications as to anyone buying its assets, nor has anyone
undertaken to pay the actual loss. CN had also explored the possibility of selling the right-of-way (from
Stratford to the Bruce Energy Centre), unbroken and stripped of rail and ties, to the rail company corporate
shell referred to by IEDC. CN indicated that to date it "has not received any real comfort that even this far
more modest transaction has any real corporate and/or government financial support".
In his submission, Mr. Murray Calder, M.P. for Wellington-Grey-Dufferin-Simcoe, raised concerns that
CN had "failed to actively market or maintain the line. The line is of poor quality and subject to weight
restrictions limiting its use from some customers". Mr. Calder also commented that "the line would be more
attractive to shippers if year round service was available".
The remaining interventions dealt with public interest considerations rather than the economic viability of
the branch line. The Agency can consider this evidence only if it concludes that there is a reasonable
probability of the branch line becoming economic in the foreseeable future.
FINDINGS
Public Hearing
Upon review of the interventions filed, the Agency determined that a public hearing was not required and
that a decision could be rendered based on the information on file.
Actual Losses
Under the NTA, 1987, where opposition to an abandonment application is received, section 163 of the
NTA, 1987 requires the Agency to determine the amount of actual loss, if any, of the railway company
attributable to the branch line in each of the prescribed financial years. The Agency must also give public
notice of the determination made and of the principal factors applied in making that determination.
Consequently, on November 4, 1994, the Agency issued its interim determination of the actual losses
incurred in the operation of the branch line for 1991, 1992 and 1993 based on information submitted by
CN. The Agency reserved the right to make a new determination of the actual losses after a review of the
evidence filed by the interested parties.
Costs have been adjusted since the Agency's interim determination for various reasons, namely: CN had
omitted to include revenues and costs for three carloads for 1992, depreciation and capital costs for the
Kincardine Subdivision (abandoned effective October 30, 1993) were erroneously claimed, a new cost of
capital was set for 1993, and other on-line and off-line costs were disallowed.
Based on all information on file and received during the course of its analysis, the Agency has determined,
in accordance with the provisions of the Railway Costing Regulations, SOR/80-310, and section 157 of the
NTA, 1987, that the final determination of the actual losses is as follows:
Year Total cost
$ Revenues
$ Actual Loss
$
1991 332,852 132,021 200,831
1992 340,152 94,535 245,617
1993 295,666 104,879 190,787
A breakdown by major cost category of the principal factors applied in determining the amounts of actual
loss is attached as Appendix 2.
Economic Determination
Traffic on the branch line declined from 24 carloads in 1991 to 14 carloads in 1992 and increased to 15
carloads in 1993. When the Agency issued its interim determination of actual losses, carload traffic for
1992 indicated 11. This figure has since been revised to 14 by CN. Although carloads did increase in 1993,
the revenues generated by this traffic were not sufficient to offset the costs of operating the branch line.
Train service on the branch line is already at a minimal level. The Agency is of the view that no further
reduction in operating levels are possible to reduce such losses.
Consequently, under these circumstances, the Agency concludes that the branch line is uneconomic. As the
Agency has determined that the branch line is uneconomic, it must also determine whether there is a
reasonable probability of its becoming economic in the foreseeable future. If there is no reasonable
probability of this occurring, the Agency must order that the operation of the branch line be abandoned.
Probability of Becoming Economic
The Agency considered the evidence received in response to its April 3, 1992 Notice of Reconsideration,
its July 3, 1992 Notice of interim actual losses pertaining to the operation of the Newton Subdivision from
Stratford (mileage 1.17) to Palmerston (mileage 36.62), including the 1.41 mile segment of the Kincardine
Subdivision, and the Owen Sound Subdivision from Palmerston (mileage 0.00) to Owen Sound (mileage
71.43), and its Notice of interim actual losses dated November 4, 1994 pertaining to the operation of
Newton Subdivision from Stratford (mileage 1.17) to Palmerston (mileage 36.62) and the Owen Sound
Subdivision from Palmerston (mileage 0.00) to Harriston (mileage 9.43).
Carload traffic on the branch line has not been significant during the prescribed financial years averaging
approximately 17 carloads annually.
The submission of IEDC on future traffic volumes replicates, in part, Canadian Agra's earlier traffic
projections and includes IEDC's projections for alternative fuels. Moreover, these latter traffic projections
would only materialize in 1997. The Agency notes that IEDC has not made mention of how traffic would
move out of the Bruce Energy Centre. Earlier discussions to that effect were based on the re-
commissioning of the CN Southampton Subdivision, which CN has estimated as costing in the range of $18
to $ 24 million.
Therefore, after considering the present and potential traffic levels, the fact that there are no agreements in
place that would actually generate an increase in traffic on the branch line, and the high cost of re-
establishing rail service to the IEDC facility, the Agency concludes that there is no reasonable probability
that the branch line will become economic in the foreseeable future. Therefore, in accordance with
subsection 165(1) of the NTA 1987, the Agency must order the abandonment of the operation of the branch
line.
OTHER MATTERS
Mr. Calder raised concerns respecting the marketing and maintenance of the branch line.
It should be noted that shippers have the right to request rail service and that the railway companies must
provide it. CN does have common carrier obligations pursuant to sections 144, 145 and 146 of the NTA,
1987. Section 147 of the NTA, 1987 allows for complaints to be made at which time the Agency would
investigate the matter. The Agency did not receive any complaints in this regard.
Environmental Assessment
Insofar as environmental issues are concerned, the Agency is subject, since January 19, 1995, to the
Canadian Environmental Assessment Act, 1992, c. 37. However, the Agency is of the opinion that the
Environmental Assessment and Review Process Guidelines Order, SOR/84-467 (hereinafter the EARP
Guidelines Order) continue to apply to this application since it was received prior to that date.
In 1990, the Agency developed in cooperation with the Federal Environmental Assessment Review Office
an Agency Exclusion List, pursuant to paragraph 11(a) of the EARP Guidelines Order, identifying the types
of proposals that would not produce any adverse environmental effects and that would, as a result, be
automatically excluded from the Environmental Assessment and Review Process. In subjecting this
proposal for the abandonment of the operation of the branch line under sections 162 and 166 and subsection
165(1) of the NTA, 1987 to an environmental screening pursuant to subsection 10(1) of the EARP
Guidelines Order, the Agency determined that this proposal is of a type identified on the Agency Exclusion
List, and, as such, the proposal may automatically proceed should the Agency so authorize.
CONCLUSION
After consideration of all the evidence before it, the Agency determines that the branch line is uneconomic,
that there is no reasonable probability of its becoming economic in the foreseeable future, and that,
therefore, its operation shall be abandoned.
Section 168 of the NTA, 1987 provides that the Agency shall fix a date for the abandonment of the
operation of a branch line that is not less than thirty (30) days or more than one (1) year from the date of the
abandonment order. The Agency therefore fixes the abandonment date of the operation of the branch line at
thirty (30) days from the date of the Order giving effect to this Decision.
1
Hosted by www.Geocities.ws