Agency Rulings

Decision No. 112-R-1993

February 25, 1993

IN THE MATTER OF an agreement between the Canadian National Railway Company and the St. Clair Tunnel Company, pursuant to section 158 of the National Transportation Act, 1987, R.S.C., 1985, c. 28 (3rd Supp.), to convey by transfer to the St. Clair Tunnel Company by the Canadian National Railway Company a line of railway, namely 1.19 miles of the St. Clair Tunnel Subdivision from mileage 0.54 to mileage 1.73, including lands, buildings and related rail facilities, which line of railway is to become part of the Hobson Subdivision from mileage 0.00 to mileage 1.19, in Sarnia, in the Province of Ontario.

File No. T 6135/637

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INTRODUCTION

The St. Clair River Tunnel comprises a line of railway located under the St. Clair River between Sarnia, Ontario and Port Huron, Michigan (hereinafter the existing tunnel).

The St. Clair Frontier Tunnel Company was incorporated under the laws of Canada in 1884 and was responsible for the construction of the Canadian portion of the railway pursuant to An Act to incorporate the St. Clair Frontier Tunnel Company (1884 Statutes of Canada 82/47 Vict. 19th of April, 1884) (hereinafter the SCFTC Act). The SCFTC Act also gave the St. Clair Frontier Tunnel Company the power to amalgamate with a similar company chartered in the United States, namely the Port Huron Railroad Tunnel Company.

The Port Huron Railroad Tunnel Company was incorporated under the laws of the State of Michigan on October 8, 1886 and was responsible for the construction of the American portion of the railway.

In 1886, the St. Clair Frontier Tunnel Company and the Port Huron Railroad Tunnel Company amalgamated to form the St. Clair Tunnel Company. Articles of Amalgamation dated November 9, 1886 were filed with and certified by the Secretary of State of Canada on November 15, 1886 and filed with and certified by the Secretary of the State of Michigan on November 23, 1886.

Under authority of Order in Council P.C. No. 1958-302 dated February 18, 1958, the St. Clair Tunnel Company entered into an agreement on March 31, 1958 to amalgamate with the Canadian National Railway Company (hereinafter CN).

The certificate of dissolution of the St. Clair Tunnel Company was issued by the Secretary of the State of Michigan on March 31, 1958 and a copy of the certificate of dissolution was deposited with the Secretary of State of Canada on the same date.

By virtue of section 154 of the Railway Act, R.S.C. 1952, c. 234, CN became vested with the railways and undertakings and all other powers, rights, privileges, franchises, assets, effects, and properties, real, personal and mixed, belonging to, possessed by, or vested in the St. Clair Tunnel Company, or to which it was or became entitled.

CN has been operating the existing tunnel between Sarnia and Port Huron as part of its main rail line from Toronto, Ontario to Chicago, Illinois since 1958. CN has indicated that the dimensions of the existing tunnel are too small to handle double-stack container cars and the modern rail equipment used for the automotive industry. At present, rail traffic which is too large to move through the existing tunnel must be transported by barge across the St. Clair River.

CN desires to arrange to have constructed a new large diameter tunnel adjacent to the existing tunnel to eliminate the need to barge large rail equipment and to increase operating speeds. CN maintains that these changes, together with reduced car handling, will improve transit time and provide better service to customers.

CN has determined that it would be in its best interest financially to have the new enlarged tunnel constructed and operated by two separate American corporations. CN maintains that this will enable all direct and indirect costs of the new tunnel to be identified accurately and facilitate optimum financing of the new tunnel with funds to be raised in the United States.

Accordingly, pursuant to subsection 91(6) of the Financial Administration Act, R.S.C., 1985, c. F-11, the Governor in Council issued P.C. Order No. 1992-1413 dated June 22, 1992 which authorized CN to procure the incorporation of two corporations in accordance with the laws of the State of Michigan in the United States, and to acquire the shares of the corporations so incorporated.

On July 13, 1992, CN caused the incorporation of the St. Clair Tunnel Company and the St. Clair Construction Company pursuant to the laws of the State of Michigan.

The purposes of incorporation of the St. Clair Tunnel Company are to operate and maintain a railroad from Port Huron to Richmond in St. Clair County, Michigan, and to operate and maintain a railroad tunnel under the St. Clair River between Port Huron, Michigan and Sarnia, Ontario. By virtue of its July 31, 1992 purchase of a 16.4 mile line of railroad between milepost 39.2 at Pound Road, northeast of Richmond, Michigan and milepost 55.6 near Port Huron, Michigan from the Grand Trunk Western Railroad, the St. Clair Tunnel Company became a "rail carrier" under the Interstate Commerce Act, T. 49 U.S.C.A., 92 Stat. 1337, in the United States.

The St. Clair Tunnel Company intends to acquire ownership of the existing tunnel and its approaches on the Canadian side and to grant CN the right to operate trains, locomotives, cars and equipment with its own crews over the railway line which forms the Canadian approach to the existing tunnel together with the railway line in the existing tunnel from the Canadian Portal to the U.S. Portal as well as the railway line which forms the United States approach to the existing tunnel, subject to the necessary approvals being granted.

TRANSFER AGREEMENT

On August 7, 1992, CN entered into an agreement (hereinafter the transfer agreement) with the St. Clair Tunnel Company (hereinafter the SCTC) to convey by transfer to the SCTC, a wholly owned subsidiary of CN, a line of railway, namely 1.19 miles of the St. Clair Tunnel Subdivision from mileage 0.54 to mileage 1.73.

The transfer agreement includes the conveyance by CN to the SCTC of the above line of railway, including the land and premises which form the Canadian approach to the existing tunnel together with the land, structure and premises from the Canadian Portal of the existing tunnel to the International Boundary. Under the terms of the transfer agreement, the SCTC will cause to be constructed the new, larger diameter tunnel parallel to and approximately 85 feet north of the existing tunnel. As previously mentioned, the transfer agreement also contemplates the granting by the SCTC to CN of the right to operate trains, locomotives, cars and equipment with its own crews (running rights) in the existing tunnel and in the new tunnel after completion of its construction.

The transfer agreement also provides for the continuing management, operation and maintenance of the existing tunnel and the proposed tunnel by CN for and on behalf of the SCTC upon its completion. The transfer agreement also provides that CN will undertake to keep insured the existing tunnel in a manner consistent with the insurance arrangements applicable to the existing tunnel prior to its conveyance to the SCTC. Further, CN will include the SCTC as a named insured in such insurance arrangements without the insurers having any right of subrogation against any and all of those insured, in accordance with the terms of the transfer agreement.

On August 25, 1992, the National Transportation Agency (hereinafter the Agency) received notice from CN and the SCTC of the transfer agreement pursuant to subsection 158(2) of the National Transportation Act, 1987 (hereinafter the NTA, 1987). The CN notice was revised on September 8, 1992 to reflect the correct mileage points.

Concurrently with the filing of the transfer agreement on August 25, 1992, the SCTC filed six applications, which were amended on September 8, 1992, with the Agency, pursuant to sections 123, 197, 200 and 201 of the Railway Act, R.S.C., 1985, c. R-3. These applications requested the necessary approvals relating to the subsequent relocation or deviation of the existing tunnel, namely 1) the deviation of a section of railway; 2) the connection of the track of SCTC with the track of CN; 3) the reconstruction of the Vidal Street bridge; 4) the construction under the Vidal Street Pedestrian bridge; 5) the construction under Christina Street; and 6) the construction of a deviation under the track of CSX Transportation Inc. These six applications are being dealt with separately by the Agency.

PUBLIC NOTICE OF TRANSFER AGREEMENT

In accordance with the directives of the Agency of September 11, 1992, CN/SCTC published notice of the transfer agreement in local area newspapers on September 18 and 22, 1992 and served copies of the notice on interested parties on September 15, 1992. Interveners were given thirty (30) days or until October 22, 1992 in which to respond to the notice and file their submissions with the Agency. A few interveners requested additional time to submit their interventions and were granted extensions until October 29, 1992 by the Agency.

PUBLIC INTEREST SUBMISSIONS

In response to the aforementioned notice, a total of thirteen (13) submissions were received. Of the thirteen parties who intervened, eleven are located in the Detroit/Windsor area and two in Sarnia.

The arguments of those interveners located in the Detroit/Windsor area either focused on their opposition to the proposed construction of the new tunnel in Sarnia or, alternatively, supported the construction of a double-stack capacity tunnel in the Windsor area on public interest, economic and environmental grounds.

Several of these interveners contended that the transfer agreement should not be approved as the construction of a rail tunnel at Sarnia would have, among other matters, an adverse economic impact on the Detroit/Windsor area, shifting industrial, warehousing and intermodal transportation activities away from Detroit. According to the interveners, creating a double-stack corridor through Sarnia/Port Huron cannot rival a double-stack corridor through Windsor/Detroit in terms of creating primary and secondary industries as the Sarnia/Port Huron corridor would completely bypass the vital industrial centers of southwestern Ontario and southeastern Michigan.

The interveners maintained that the proposed construction of the new tunnel at Sarnia would not be in the public interest as it would not assist in the development of an economic, efficient and adequate rail network which maintains the economic well being and growth of southwestern Ontario, as envisaged by subsection 3(1) of the NTA, 1987.

Further, two feasibility studies were filed by the interveners on the impacts/benefits of constructing a rail tunnel in the Sarnia/Port Huron area versus the Detroit/Windsor area. One of these studies concluded that the construction of a double-stack tunnel in the Detroit/Windsor area would enhance Detroit as a location for transportation-intensive industries and would have more potential for economic benefits. The other study deduced that the Detroit/Windsor site represented a preferred site for construction of a new tunnel, based on the physical condition of the site, economics and geological and environmental concerns.

The interveners maintained that the Sarnia/Port Huron project may cause the retardation of industrial development in not only southwestern Ontario but in the entire province as well as have a significant impact on market forces and competition in the Ontario-based rail market, contrary to the objectives of the NTA, 1987.

Others argued that Agency approval of an independent CN rail tunnel at Port Huron would be tantamount to allowing CN a monopoly in double-stacked container rail services in southern Ontario contrary to the public interest. The interveners contended that an independent CN railway tunnel at Sarnia/Port Huron has the potential of preventing or lessening competition substantially between the providers of rail services for shippers in southwestern Ontario and the Detroit/Windsor area and would have a significant adverse impact on the competitiveness of export-oriented shippers in both southwestern Ontario and Detroit and on future development for growth in these areas.

The interveners maintained that the Agency has the mandate to ensure that the economic development of Ontario continues to grow and, also, to support Canadian export trade. Certain interveners suggested that the Agency complete an analysis of the economic benefits of all available alternatives in southwestern Ontario and the relative impact of all alternatives on the maintenance of a viable rail network based on competition of market forces and the growth of industrial development in southwestern Ontario.

In addition, certain environmental concerns were raised by the interveners in their submissions. Their concerns pertained to changing land-uses in the United States, disturbance of the polluted aquifer, further geotechnical testing, spills management and disposal of contaminated spoil and tunnel seepage.

CN/SCTC responded to the interventions stating that the applications submitted to the Agency relate to a location in the Sarnia/Port Huron area and that the jurisdiction of the Agency is confined to these particular applications which must be considered on the basis of their own intrinsic merit and the option of sanctioning another location simply does not exist.

CN/SCTC submitted that its construction project is not intended to take anything away from either southwestern Ontario or the Detroit/Windsor area, nor to deprive rail shippers of legitimate rail services; rather, the project will improve rail services and the competitive position of both CN North America and its rail customers. CN/SCTC indicated that their project is aimed at enhancing rail services between eastern Canada and Chicago and is not concerned with creating primary and secondary industries.

CN/SCTC asserted that, insofar as international trade exchanges and traffic flows are concerned, the enlarged tunnel in the Sarnia/Port Huron area constitutes the best location for rail traffic moving in the Montréal/Toronto and Chicago corridor. Further, CN/SCTC submitted that, in addition to providing improved rail services to rail users, this project will foster inter and intra-modal competition and will enhance the proponent competitiveness of the railway companies with resultant benefits for all concerned. It is the contention of CN/SCTC that the construction project is a pro-competitive initiative which will intensify the already fierce inter and intra-modal competition between freight carriers.

CN/SCTC further submitted that the national transportation policy statement appearing in section 3 of the NTA, 1987 must be construed from a national perspective as opposed to a local or regional assessment standpoint. According to CN/SCTC, this policy contemplates a multi-modal approach whereby the sum total of the carriers can provide adequate transportation services to the total community. It is the contention of CN/SCTC that the Windsor area does enjoy this transportation environment and that the proposed construction at Sarnia will not impede the economic well being and growth of southwestern Ontario. CN/SCTC maintained that a separate and distinct initiative is currently under way with respect to the Detroit/Windsor rail tunnel in order to improve rail traffic in that area; but, the two projects should not be confused.

Moreover, CN/SCTC did not concur that the construction project would create a monopoly in the movement of container traffic. According to CN/SCTC, container traffic is one of the most competitive markets that can exist between water, motor vehicle and rail carriers. CN/SCTC submitted that the mere construction of an enlarged tunnel cannot and will not change this competitive environment; quite the contrary, the improved rail services will intensify what is already a most competitive environment.

In response to the environmental concerns of the interveners, CN/SCTC responded that the issues affecting the United States should not be the subject of a Canadian assessment and that the aquifer, spills and waste disposal were fully explored in submissions to the Agency and Canadian environmental agencies with the conclusion that impacts would be insignificant or mitigable with known technology.

In addition to the above, submissions were received from the Chippewas of Sarnia Band Council (hereinafter the Chippewas) and the Walpole Island First Nation (hereinafter Walpole Island) and pertained to disputes over native land interests.

Walpole Island contended that they surrendered parts of the bed of Lake St. Clair and the St. Clair River in 1958 to the Government of Canada but have not, at any time, surrendered those lands where the undertaking is situated. Moreover, Walpole Island submitted that the construction of the railway tunnel is directly on lands which have never been ceded by Walpole Island to the Crown or any other entity and therefore title to the St. Clair River and to the lands under the waters of the St. Clair River which have never been ceded by formal treaty remains unextinguished.

In response to the submission of Walpole Island, CN/SCTC indicated that, with respect to the limits of the Port of Sarnia, the Government of Canada and the Province of Ontario have asserted their rights of ownership by virtue of the Ontario Harbours Agreement Act, S.C. 1963, c. 39, and the Ontario Harbours Agreement Act, S.O. 1962-63, c. 95, and that the proponent railway companies intend to construct the proposed tunnel within the confines of the Port of Sarnia after having secured all appropriate authorizations from the Government of Canada.

Moreover, CN/SCTC submitted that the ownership of the land over which the proposed tunnel is to be constructed is one to be resolved by the two proponent railway companies with the owner of the said property. CN/SCTC maintained that any authorization that the Agency may grant must be followed up with acquiring the necessary property rights in order to proceed with the proposed construction. According to CN/SCTC, the rights of Walpole Island will not be affected whatsoever, in this instance.

The Chippewas stated that the portion of Vidal Street which is intersected by the existing and proposed installations of CN/SCTC and which is also subject to a crossing application is reserve status land and that title to the land is vested in the federal government in trust for the Chippewas and has not yet been dealt with in accordance with section 35 of the Indian Act, R.S.C., 1985, c. I-5. It is their contention that no authorization has been granted, pursuant to the Indian Act, whereby CN is entitled to use the land. Therefore, they submitted that there is no basis upon which CN can claim a right to transfer title of the land or any interest therein to the SCTC, until the proper authorizations have been given. Further, the Chippewas submitted that CN should be required to obtain title to the land or such an interest therein that is sufficient for the purposes of CN, as required by the Indian Act, prior to the application being dealt with by the Agency; otherwise, it would not be appropriate for the Agency to approve the application.

CN/SCTC also objected to the Chippewas raising the issue of the disputed interest in the land at Vidal Street inasmuch as, according to CN/SCTC, this matter was disposed of by the Railway Transport Committee of the former Canadian Transport Commission in its Decision dated March 24, 1986 and Order No. R-39225 dated April 4, 1986, following consideration of the same legal issues raised by the Paul Indian Band. In Order No. R-39225 which pertained to an application by CN for authority to construct a mainline track at grade across certain road allowances located in Alberta, the Railway Transport Committee ruled that, with respect to the resolution of native land claims and the exercise of statutory jurisdiction pursuant to the Railway Act:

... These questions are beyond the jurisdiction of the Commission and involve an adjudication of native land claims and civil rights both of which are matters which ought to be raised in a forum possessing jurisdiction to resolve those issues. In this case we have proceeded on the basis that the Crown in Right of Canada is the legal titleholder of the lands in question. In these circumstances notice of the CN application has been given to the Crown as legal titleholder, through the Department of Indian and Northern Affairs, as well as to the Indian Band as the local authority for the residents of the area in question. This is consistent with the practice of the Commission in disposing of applications under Sections 196-198 of the Railway Act where Indian lands are or may be affected.

Accordingly, CN/SCTC submitted that the title to the land, or any dispute relating thereto, is not a matter for resolution by the Agency. Further, the disputed interests in the land cannot be and are not a bar or fetter on the exercise of statutory jurisdiction by the Agency per CN/SCTC; and, any ruling issued by the Agency is without prejudice to existing title of property and must be followed up with acquiring the necessary property rights in order to proceed with the proposed construction.

CN/SCTC submitted that the Agency take judicial note of the original federal legislation and Order-in-Council which authorized the construction of the Sarnia/Port Huron tunnel and the approved access thereto involving highway-railway crossings which have existed for a period of over 100 years of uninterrupted operations.

Because of the issues raised by Walpole Island and the Chippewas, the Agency solicited the comments of the Minister of Indian Affairs and Northern Development (hereinafter the Minister) by letter dated December 11, 1992 on this matter.

The Minister submitted that while he was of the view that the bed of the St. Clair River does not constitute Indian reserve land, both the Chippewas and Walpole Island claim an aboriginal interest in this land.

Further, the Minister stated that the proposal from CN requires crossing Vidal Street to enter the proposed tunnel and that the required portion of Vidal Street is part of the tract of land set apart as a reserve for the use and benefit of the Chippewas in 1827. According to the Minister, there is no record of any surrender of this land by the Chippewas or of any grants or authorization under the Indian Act which would give CN the right to use or occupy this property as it is currently doing. The Minister further submitted that corporations having the power to take lands for public purposes must acquire the right to take or occupy Indian reserve lands pursuant to section 35 of the Indian Act.

The Minister stated that Indian reserve land is land owned by the Crown which has been set apart for the use and benefit of a band of Indians. These lands are under federal jurisdiction and are administered under the provisions of the Indian Act. The Minister indicated that the courts have ruled that the federal Crown has certain fiduciary obligations with regard to reserve lands. Further, the Minister maintained that an important aspect of this obligation necessitates that the Crown act honourably in dealing with Indian people and meet the standards of a fiduciary in dealing with reserve land. It was the contention of the Minister that this obligation extends not only to the Department of Indian Affairs and Northern Development but to all federal departments and agencies. Consequently, the Minister recommended that no action be taken that would prejudice the interest of the Chippewas in these lands or any future negotiations between the Chippewas and CN for the acquisition of the interest it requires.

The Minister recommended that the Agency carefully review and consider the decision of the Supreme Court of Canada in R. v. Sparrow (1990), 70 D.L.R. (4th) 385 (S.C.C.) (hereinafter the Sparrow case) in regard to the claims of the Chippewas and Walpole Island.

In addition to the comments cited earlier in this Decision, the Minister also attached a report on the 1896 closure of Thistle (now Vidal) Street and the events surrounding its closure.

According to the report, the St. Clair Tunnel Company applied, pursuant to Order in Council P.C. No. 142 dated February 25, 1889, to purchase a portion of the Indian Reserve at Sarnia, the same being required for the purposes of the St. Clair Tunnel. Under the terms of the Order, the land applied for was "supposed to contain about 6 12-100 acres, being situated East of Thistle Street and south of the track of the Sarnia Branch of the Grand Trunk Railway ...". Authority to effect a sale to the St. Clair Tunnel Company of the land applied for was granted on condition that the St. Clair Tunnel Company construct a crossing over the approach to the Tunnel of the Grand Trunk Railway line for the safety and protection of the Indians living in that section of the Reserve as otherwise they would be obliged to travel a long distance to reach Sarnia.

The surrendered Sarnia reserve lands adjoining Thistle Street were subsequently sold to the St. Clair Tunnel Company but the latter did not live up to the requirement of building the bridge over Thistle Street due to a number of reasons. The St. Clair Tunnel Company later applied to the Railway Committee of the Privy Council "for leave to close up a portion of Thistle Street, in the Town of Sarnia, so as to obviate the necessity for the construction of an overhead bridge, crossing the railway approach to the St. Clair Tunnel at this point and to divert certain street traffic, which would be required if the request were granted ...". On February 23, 1894, the Railway Committee ruled that "... no sufficient reason has been given for the closing up of Thistle Street, and diversion of street traffic, as proposed by the St. Clair Tunnel Company, ...".

The predecessor of the Department of Indian Affairs and Northern Development continued to press the company on the bridge issue but the matter did not get resolved. At one stage, the Sarnia Indians reluctantly agreed to accept $15,000.00 as indemnity in lieu of the bridge but the St. Clair Tunnel Company found this amount too high and refused to accept this option.

Having failed to secure an approval for the proposed closure of Thistle Street from the above Railway Committee, the St. Clair Tunnel Company next applied to the Ontario Legislature for permission to close the Street.

The Private Bills Committee of the Ontario Legislature heard the St. Clair Tunnel Company representative on March 13, 1896. The representative admitted before the Committee of the obligation of his company to build the bridge under the previous commitment but indicated that the proposal had to be dropped because of the engineering concerns that such a bridge would be too risky to build and would be totally unsafe to use. The representative indicated that the company was, however, willing to provide reasonable compensation to the band.

The Private Bills Committee passed the clause of the Bill authorizing the closure of Thistle Street at the tunnel approach but the clauses dealing with the remainder of the Bill were postponed pending further discussion between the interested parties over the compensation question. At this point, the Department of Justice was instructed by the predecessor of the Department of Indian Affairs and Northern Development to oppose the Bill as ultra vires because it affected the public property of Canada. The Bill as such was unacceptable unless a comprehensive clause covering all damages was inserted. However, the St. Clair Tunnel Company was not agreeable to any clause that would make the company liable to compensate the band for not constructing the bridge over Thistle Street.

The Chairman of the Private Bills Committee then ruled that the Committee could only consider compensation for damages caused by closure of Thistle Street which was the only matter being dealt with by the Bill. The Agent of the Minister of Justice representing the predecessor of the Department of Indian Affairs and Northern Development then declined to take further part in settling the compensation clause of the Bill which subsequently received Royal assent on April 7, 1896.

Pursuant to "An Act respecting Thistle Street in the Town of Sarnia", 59 Vict. 399, the St. Clair Tunnel Company represented by their petition to the Legislative Assembly of the Province of Ontario that it would be in the public interest that the street known as Thistle Street, in the town of Sarnia, in the county of Lambton, should, insofar as the street crosses the property of the said company, be closed upon condition that the said company shall pay all such damages as shall be caused by closing the said street.

The Act stated that "that portion of the street known as Thistle Street ..., crossing the excavation made by the St. Clair Tunnel Company for the purpose of the approach to the tunnel of the said company, is hereby closed and declared to be no longer a public road or highway". It further stated that "For all damages, including damage to lands injuriously affected by depreciation in value by reason of the closing of the street, compensation shall be made to the owners, and such compensation shall be ascertained and determined under the provisions of The Railway Act of Ontario, ...". Under the Act, "owners" included the Chippewa Band of Indians occupying the Sarnia reservation, and all other persons or corporations "who own land and claim that the same has been injuriously affected by the closing of said street".

The Minister of Justice filed a report dated March 15, 1897 with the Committee of the Privy Council stating that the Minister of Justice had for consideration certain representations made to him on behalf of the Chippewas Band of Indians of Sarnia, "to the effect that adequate provision had not been made by the said Act for the assessment and payment of damages suffered by the Indians, by reason of the closing of Thistle Street". However, after having made full enquiry and having considered the claims, the Minister of Justice concluded that the said Act contained reasonable provision for ascertainment and payment of all damages and recommended that it be left to its operation despite his initial objection. The Committee of the Privy Council concurred with the recommendation of the Minister of Justice pursuant to Order in Council P.C. No. 672 dated March 23, 1897.

Protracted negotiations followed between the predecessor of the Department of Indian Affairs and Northern Development and the St. Clair Tunnel Company to settle the compensation package due to the Sarnia Band and its members for the damages caused by the closure of Thistle Street in accordance with the 1896 Act cited above but failed. The issue of compensation for the closure of Thistle Street was eventually resolved by John A. MacKenzie on June 15, 1899 through an arbitration award.

In reply to the submission of the Minister, CN/SCTC responded that they were well cognizant of the Sparrow case which enunciates the principles which should guide the interpretation of legislative and regulation making powers and describes "the special trust relationship and the responsibility of the government vis-à-vis aboriginals". They submitted that nothing in the applications purports to violate any of these principles to which they contend they subscribe.

Further, CN/SCTC noted the following passage from the Sparrow case at pages 416-417:

Within the analysis of justification, there are further questions to be addressed, depending on the circumstances of the inquiry. These include the questions of whether there has been as little infringement as possible in order to effect the desired result; whether, in a situation of expropriation, fair compensation is available, and whether the aboriginal group in question has been consulted with respect to the conservation [environmental] measures being implemented...

CN/SCTC maintained that, in the present circumstances and proposals, little if any "infringement" is involved as compensation continues to be offered and there has been reasonable consultation on all environmental issues directed at resolving any legitimate band concerns.

Further, CN/SCTC stated that the Agency is a regulatory body/tribunal with statutory jurisdiction pursuant to various statutes, laws and regulations. According to CN/SCTC, the Agency is not a court of common law with unlimited jurisdiction and does not possess the authority to adjudicate upon land claims. In support of their position, CN/SCTC reiterated the conclusion (cited earlier) of the Railway Transport Committee in its Decision dated March 24, 1986 and Order No. R-39225 dated April 4, 1986 which dealt with railway crossing applications involving land (roadway) held in trust by the Government of Canada for and on behalf of the Paul Indian Band and which recognized the jurisdictional limitations of the Railway Transport Committee in matters relating to the adjudication of native land claims.

CN/SCTC contended that the Agency is governed by similar statutory requirements without prejudice to any other disputes/issues that may exist between the parties. CN/SCTC submitted that it is a false premise to suggest that the granting of the various applications by the Agency could in some way jeopardize or prejudice land claims which the Indians or aboriginal people may otherwise be entitled to.

Granting the conveyance application would, according to CN/SCTC, authorize the transfer of a line of railway from one company to another but would have no effect whatsoever on interests of third parties. It was the contention of CN/SCTC that, if any such land disputes exist vis-à-vis the affected properties, these would have to be resolved according to law and in the appropriate fora. Moreover, should the necessity to acquire third parties' property occur, CN/SCTC maintained that the proposed acquirer would have to acquire title thereto according to applicable law.

Secondly, CN/SCTC maintained that, in the context of railway-highway crossing applications, the matters of land ownership and titles are not relevant considerations except to identify who is the relevant road authority.

Furthermore, CN/SCTC contended that the construction and operation of the existing tunnel, including the approaches, were authorized by Parliament by virtue of the SCFTC Act and that the exact location of the tunnel was specifically sanctioned by the Governor in Council, pursuant to section 17 of P.C. Order No. 2097 dated November 24, 1886. Since the railway presence in this rail corridor was authorized by the highest authorities, CN/SCTC stated that they failed to understand the suggestion of the Minister that "There is no record of any surrender of this land by the Sarnia Band or of any grants or authorization under the Indian Act which would give CN the right to use or occupy this property as it is currently doing".

Moreover, respecting the proposed conveyance of the subject railway line, including lands, buildings and related rail facilities, CN indicated that it cannot convey to the SCTC any greater rights or property than it possesses. CN/SCTC submitted that if there is any portion of land which has the status of unsurrendered Indian land held in trust by the Government of Canada for and on behalf of the Chippewas, such status of the land will remain undisturbed. CN/SCTC stated that both have expressly indicated that they are content that the granting of regulatory approval by the Agency will not prejudice any claims to land rights of the bands, nor constitute an involuntary taking of title to any unsurrendered band lands or other appropriation.

Subsequent to the filing of the above submissions, the Agency received a letter dated February 4, 1993 from the City of Sarnia (hereinafter the City) in response to the Agency's letter requesting comments on the application for the reconstruction of the Vidal Street bridge. The City maintained that the Municipal Act, R.S.O. 1990, c. M.45, provides and has historically provided that, among other matters, all roads on which public money has been expended for opening them, all roads passing through Indian lands and all bridges over any such allowance for road, highway or road, are common and public highways.

Further, the City stated that the Surveys Act, R.S.O. 1990, c. S.30, provides that every road allowance, highway, or street shown on a Plan of Subdivision shall be deemed to be a public road, highway or street and that Thistle Street, which was the original name for Vidal Street, was shown on a Registered Plan of Subdivision. The City is of the understanding that an agreement was struck in 1929 between the Corporation of the Township of Sarnia (hereinafter the Township) and the Chippewas for the maintenance of the roads and the successor of the Township in title, the Corporation of the City of Sarnia has honoured the agreement.

The City also indicated that since 1919 it has been the road authority at the intersections of Vidal Street and the existing and proposed installations of CN and has recently granted an easement to CN at that location. According to City officials, Surrender No. 869 of 1919 surrendered to the municipality a number of lots and "any other road allowances" north of Lot No. 7, Ranges 4 to 6 and west of Range 3 (essentially any road allowances north of the present Churchill Road and west of the present Scott Road). The City maintained that the above-noted piece of Vidal Street clearly falls within that area.

In addition, the City stated that, in 1953, the Chippewas passed a resolution giving all lands within the then Reserve to the City of Sarnia for road purposes. The City maintained that while the portion of Vidal Street in question did not form part of the Reserve at that time, it was clear that in 1953 the Band Council intended to divest itself of all responsibility for roads within the Reserve.

As the Agency considered the submission of the City to be relevant to the conveyance application, the Agency re-opened pleadings and sought the comments of CN, the Chippewas, Indian Affairs and Northern Development and Walpole Island.

Referring to Surrender No. 869, the Chippewas maintained that the "road allowances within the boundary of the surrendered areas could be only those which were dealt with or were intended to be dealt with by the surrender" and to suggest a different interpretation now is contrary to all information, understanding and belief heretofore known concerning this surrender. Further, the Chippewas contended that approval of the conveyance application would represent "a tacit approval by the Agency to the applicants proposed new and further trespass on Indian Reserve lands."

It was the position of officials of Indian Affairs and Northern Development that the portion of South Vidal Street (formerly Thistle Street) between the CN track and the northern boundary of River Lot 44 in Sarnia constitutes part of the Sarnia Indian Reserve and that title to or Indian interest was never surrendered or otherwise disposed of to the City or any other party. Officials contended that the fact that this roadway continues to be federal Crown lands set apart as part of the Sarnia Indian Reserve does not conflict with the contention of the City that it is the road authority for the purpose of up-keeping and maintaining the road. Officials further stated that there were three surrenders of the areas adjacent to the subject roadway; namely, Surrender No. 143, dated January 14, 1875; P.C. Order No. 142 dated February 25, 1889 and Surrender No. 869 dated December 10, 1919. According to officials, none of these surrenders included Vidal Street.

Walpole Island is of the opinion that the Municipal Act, which is a provincial statute, has no relevance to the land claim brought by Walpole Island. Provincial legislation does not override aboriginal or treaty rights on the basis of section 88 of the Indian Act; moreover, the Municipal Act does not mean that aboriginal title and rights can be ceded without an agreement or without compensation. According to Walpole Island, the City does not own the land in question; aboriginal title and rights are still intact although the City may have administrative control or restricted use of the land. Walpole Island stated that it was not a participant in, nor a party to Surrender No. 869 in 1919 or the 1929 agreement and that this has no bearing on the aboriginal title or rights of Walpole Island. However, Walpole Island maintained that the City has never had nor do they currently possess any proprietary or other rights and interests in the lands in question and, therefore, the City does not have the legal authority to act as the road authority at the intersection of Vidal Street and the existing and proposed installations of CN nor to grant CN an easement.

CN reiterated its position that it cannot convey to the SCTC any greater rights or property than it possesses and, therefore, the status of Vidal Street is irrelevant and immaterial.

Regarding the history of the construction of the bridge at Vidal Street, the file of the Agency reveals that, pursuant to Board of Railway Commissioners for Canada (hereinafter BRC) Order No. 47814 dated December 12, 1931, the City of Sarnia was authorized, at its own expense, to construct and maintain an overhead crossing of the tracks of the St. Clair Tunnel Company on Vidal Street, in the City of Sarnia. BRC Order No. 48829 dated July 5, 1932 authorized CN to operate at the Vidal Street structure.

On September 9, 1966, the Board of Transport Commissioners for Canada authorized the City of Sarnia, pursuant to Order No. 121967, to demolish and remove the existing overhead bridge at mileage 0.99 which was constructed under the authority of BRC Order No. 47814 and to replace it with an improved overhead bridge structure carrying Vidal Street across the right-of-way and track of CN, in the City of Sarnia, at mileage 0.91 St. Clair Tunnel Subdivision. The construction of the improved structure at mileage 0.91 did not occur as the City made a significant change to the proposed design of the overhead bridge.

As a result, Order No. R-2396 dated May 21, 1968 of the Railway Transport Committee of the Canadian Transport Commission rescinded Order No. 121967 and authorized the City of Sarnia to construct the new overhead bridge at mileage 0.91, as per the revised design and to remove the existing bridge structure at mileage 0.99. Pursuant to Railway Transport Committee Order No. R-8542 dated April 13, 1970, CN was authorized to operate its engines, cars and trains under the new overhead bridge at mileage 0.91.

MATTERS TO BE CONSIDERED BY THE AGENCY

Subsection 158(3) of the NTA, 1987 states that:

Within six months after receipt of a notice under subsection (2), the Agency shall, after holding such hearings, if any, as are required in its opinion to enable all persons who wish to do so to present their views on the conveyance of a line of railway or segment, approve the agreement for the conveyance unless the Agency determines that the conveyance would not be in the public interest or that the company to whom the line or segment is to be conveyed is not authorized to operate it. [emphasis added]

A) PUBLIC INTEREST

The Agency has considered all the material submitted and has determined that a public hearing is not necessary and that a decision can be rendered based on the information on file.

In reviewing the interventions, the Agency notes that none of the interveners from the Detroit/Windsor area specifically addressed the issue of the transfer of the subject line of railway from CN to the SCTC nor gave any concrete reasons for opposing the transfer agreement other than to say that the transfer agreement will "cause" the construction of a new tunnel and should be rejected in the public interest.

However, the Agency recognizes the concerns raised by the interveners respecting the possible adverse effects that construction of a new tunnel could have on shippers, transportation firms and industries in the Windsor/Detroit area and southwestern Ontario and the future development of these areas. The Agency further notes the objections raised regarding transportation policy objectives set out in section 3 of the NTA, 1987.

Insofar as the construction of the tunnel at Sarnia is concerned, the Agency is of the view that this is a corporate decision taken by CN/SCTC and that the Agency has no jurisdiction to intervene in the CN/SCTC decision making process by directing them to construct their double-stack capacity rail tunnel at a particular location. While the Agency is concerned with public interest matters and creating a balance between the rights of shippers and those of the railway companies and other modes of transport, the goal of the Agency is an efficient, competitive, economic and adequate transportation system of viable and effective transportation services that are responsive to the needs of the shippers, in accordance with national transportation policy objectives.

The Agency is of the opinion that the overall benefits of the construction project to shippers and the economy of Canada in general will far outweigh any adverse impact that this project may have on shippers, transportation firms and industries in the Detroit/Windsor area. The Agency is of the view that the construction of a new tunnel at Sarnia, capable of handling double-stack container cars, will improve cross-border access to and from points in the United States and provide a faster and more efficient intermodal and double-stack container service by increasing operating speed, reducing car handling and transit time and eliminating the need to barge large rail equipment. The Agency is also of the view that more and not fewer markets will be opened to Canadian shippers as a result of this project and that competition among the various modes should increase thereby benefitting shippers.

The Agency notes that CN will be adequately insured against claims arising from the operation of the line of railway in that CN has undertaken to keep insured the existing tunnel in a manner consistent with the insurance arrangements applicable to the existing tunnel prior to its conveyance to the SCTC and, further, that CN will include the SCTC as a named insured in such insurance arrangements without the insurers having any right of subrogation against any and all insureds.

Insofar as environmental issues are concerned, because section 158 of the NTA, 1987 is on the Agency Exclusion List as prepared in cooperation with the Federal Environmental Assessment Review Office pursuant to the Environmental Assessment and Review Process Guidelines Order, SOR/84-467 (hereinafter the EARP Order), no environmental assessment is required for the conveyance application.

Under the EARP Order, environmental assessments are required for the concurrent applications relating to the subsequent relocation or deviation of the existing tunnel, namely 1) the deviation of a section of railway; 2) the connection of the track of SCTC with the track of CN; 3) the reconstruction of the Vidal Street bridge; 4) the construction under the Vidal Street Pedestrian bridge; 5) the construction under Christina Street; and 6) the construction of a deviation under the track of CSX Transportation Inc. The Agency will be required to address the environmental issues in its consideration of those applications.

In considering the submissions made by Walpole Island and the Chippewas, the Agency has examined the statutory history of the St. Clair Frontier Tunnel Company, specifically the SCFTC Act and P.C. Order No. 2097 dated November 24, 1886 to review how the St. Clair Frontier Tunnel Company (now CN) first obtained its statutory authority to operate over the subject line of railway.

The Agency notes that, pursuant to the SCFTC Act, section 2 states that:

The Company shall have power to construct a tunnel under the said River St. Clair, and to lay or place therein one or more tracks for the passage of cars, and to purchase, acquire, take and hold such lands, lands covered with water, beaches and other property as are necessary for the purpose of constructing the said tunnel and for the convenient using of the same; and also for the construction of such branch railway not exceeding five miles in length, as is necessary to approach the said tunnel.

Section 4 of the SCFTC Act states that the St. Clair Frontier Tunnel Company was granted the power to:

... construct, maintain, work and manage a tunnel under the said River St. Clair for railway purposes, from some point in or near the Town of Sarnia, in the County of Lambton, Province of Ontario, towards the City of Port Huron, or some point near thereto in the State of Michigan.

Further, section 17 of the SCFTC Act states that:

The Company shall not commence the said tunnel, or any work thereunto appertaining, until the Company have submitted to the Governor in Council plans of such tunnel, and of all the intended works thereunto appertaining, nor until such plans and the site of such tunnel have been approved by the Governor in Council: Provided always, that before commencing the works of the said tunnel or taking possession of any part of the beach or lands covered with water or of other property of the Crown, the Company shall obtain the consent of the Governor in Council thereto. [emphasis added]

P.C. Order No. 2097 dated November 24, 1886 indicated that the plans of the then proposed tunnel and all the intended works appertaining thereto and the site selected were approved by the Governor in Council and consent given to the commencement of the works proposed and to the taking of possession by the predecessor of CN, the St. Clair Frontier Tunnel Company:

... of so much of the beach lands covered with water, or other property ... as belongs to the Crown and as may be necessary for the purpose of constructing the said tunnel and for the convenient using of the same.

Section 29 of the SCFTC Act states that "The said tunnel shall be commenced within three and finished within eight years from the passing of this Act."

It is our understanding that the tunnel was formally opened for the carriage of traffic on September 19, 1891. (Claire Gilbert, St. Clair Tunnel Rails Beneath the River, Erin, Ontario: The Boston Mills Press, 1991).

Based on the description of the selected site and proposed line of railway outlined in P.C. Order No. 2097, the Agency is therefore satisfied that this Order includes the railway as it crosses at Vidal Street which forms part of the approach to the existing tunnel. Further, the Agency is of the opinion that the St. Clair Frontier Tunnel Company (now CN) had statutory authority granted to it to construct and operate the subject line of railway, pursuant to the SCFTC Act.

The Agency has considered the issue concerning CN's obligation to obtain statutory approval pursuant to section 35 of the Indian Act or former enactments thereof. The Agency is an administrative tribunal which may only act within the parameters of the authority granted to it by its governing statutes, e.g. the NTA, 1987 and the Railway Act. Compliance by CN with section 35 of the Indian Act is a matter that falls within the purview of the Department of Indian Affairs and Northern Development or any other body responsible for administering the provisions of the Indian Act.

The Agency is of the view that CN cannot convey to the SCTC any greater rights or property than it possesses. Similarly, any approval that the Agency may grant with respect to the conveyance application would only apply to the transfer of those assets and interest in the land which CN now has. In addition, the Agency should only form an opinion on the consequences of the proposed conveyance based on, for example, public interest, not on the conditions precedent to its legal validity. The Agency notes that the conveyance agreement is between two parties. The Agency is in the role of an approving body which may only authorize a conveyance agreement provided that it is not contrary to the public interest.

Thus, the Agency is of the opinion that section 35 of the Indian Act and/or the native land interests do not prevent the Agency from exercising its jurisdiction in this matter. In addition, the Agency is of the view that neither the interest of the Indian bands in the lands, nor any future negotiations with CN or any other party, would be prejudiced or jeopardized by the consideration of the conveyance agreement by the Agency pursuant to section 158 of the NTA, 1987 and the making of a decision thereunder.

With respect to the fiduciary duty of the Crown as set out in the Sparrow case, the Agency is of the opinion that the discharge of its duties under section 158 of the NTA, 1987 would not adversely restrict the exercise of the rights of the Indian bands to claim title to or interest in the land in question or prevent them from seeking any fair compensation. Exercising the jurisdiction of the Agency in respect of the transfer agreement would not have the effect of interfering with or regulating any constitutional aboriginal rights. Further, granting approval would not impose any limitations on the ability of the Indians to make claims against any property that they purport to own or in which they purport to have an interest or to prevent them from seeking any fair compensation in respect thereof in any forum which has the jurisdiction to deal with such matters.

In conclusion, after a review of all submissions filed with respect to the transfer agreement, the Agency determines that the evidence presented does not indicate that the conveyance by transfer of the subject line of railway from CN to the SCTC would not be in the public interest.

B) SCTC AUTHORITY TO OPERATE

The Agency is satisfied that the SCTC, a wholly owned subsidiary of CN, is authorized to operate trains over the subject trackage by virtue of its authority to operate as a rail carrier under the Interstate Commerce Act following the purchase of a 16.4 mile line of railroad from the Grand Trunk Western Railroad. The SCTC will be an American carrier operating in Canada. In addition, the SCTC, as a railway company incorporated elsewhere than in Canada that owns, controls, operates or runs trains or rolling stock on or over any line of railway in Canada pursuant to subsection 6(1) of the Railway Act is subject to Agency jurisdiction.

CN AUTHORITY TO ACQUIRE RUNNING RIGHTS

The Agency contends that the SCTC, whose shares are owned 100 percent by CN, may be authorized pursuant to section 2 of the Canadian National Railways Act, R.S.C., 1985, c. C-19, (hereinafter the CNR Act), if declared by the Governor in Council, to be comprised in Canadian National Railways. Section 2 also states that the Canadian National Railways comprise the "National Companies".

Therefore, pursuant to subsection 23(1) of the CNR Act, CN has the right to run its trains over the tracks of any other company comprised in the National Companies, in this case the SCTC. The only approval necessary for CN is the Governor in Council declaration that the SCTC is comprised in Canadian National Railways, pursuant to section 2. The running right privilege continues as long as the SCTC is controlled directly or indirectly by the National Company and is declared by the Governor in Council to be comprised in Canadian National Railways.

DETERMINATION

Accordingly, the Agency hereby approves, pursuant to subsection 158(3) of the NTA, 1987, the transfer agreement between the Canadian National Railway Company and the St. Clair Tunnel Company for the transfer of a line of railway, namely 1.19 miles of the St. Clair Tunnel Subdivision from mileage 0.54 to mileage 1.73, by the Canadian National Railway Company to the St. Clair Tunnel Company, including lands, buildings and related rail facilities, which line of railway is to become part of the Hobson Subdivision from mileage 0.00 to mileage 0.19, in Sarnia, in the Province of Ontario.