Agency Rulings

Decision No. 152-R-1995

April 3, 1995

APPLICATION by Canadian Pacific Limited, pursuant to section 160 of the National Transportation Act, 1987, R.S.C., 1985, c. 28 (3rd Supp.), for authority to abandon the operation of the segment of the Lachute Subdivision from a point near Sainte-Thérèse (mileage 28.0) to a point near Thurso (mileage 90.1), a total distance of 62.1 miles, in the province of Quebec.

File No. T 6120/115

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PUBLIC HEARING held at Lachute, Quebec on October 24 and November 22, 23 and 24, 1994.

BEFORE:

Gilles Rivard, Q.C. Chairman of the Panel and of the National Transportation Agency

Micheline Beaudry Vice-Chairman, National Transportation Agency

Keith Penner Member, National Transportation Agency

APPEARANCES:

Richard Makuch Counsel, National Transportation Agency

Stephanie McManus

R. La Rue Counsel, Canadian Pacific Limited

P. Huband

Michel De Bellefeuille Panel of Canadian Pacific Limited

Ken LeGrand

Larry Fitzpatrick

Ron Tumak

John Alternali

Daniel Mayer Mayor, City of Lachute

Maurice Dumas M.P., Argenteuil-Papineau

Denise Beaudoin Parlimentary assistant of Maurice Dumas

Pierre-Paul Meloche Assistant of Maurice Dumas

Danielle Miron Assistant of Maurice Dumas

Paul Mercier M.P., Blainville-Deux-Montagnes

Jean-François Gagné Assistant of Paul Mercier

Régent L. Beaudet M.P., Argenteuil

Diane Lapointe Assistant of Régent L. Beaudet

André Riendeau President of the Parti Québécois, county of Argenteuil

Michel Guimont M.P., vice-chairman of the Standing Committee on Transport

Florian St-Onge Reeve, Municipalité régionale de comté d'Argenteuil

Deana Silverstone Legal advisers, Conseil régional de développement de

Michel Dorval l'Outaouais, Corporation de développement des Laurentides, Municipalités régionales de comtés of Papineau, Argenteuil and Mirabel

Serge Côté Economic Development Commissioner, Conseil d'expansion économique d'Argenteuil

Paul-André David Environment and Management Consultant

Claude Ducharme Director General, Corporation de développement des Laurentides

Gilles Gagné Director General, Conseil régional de développement de l'Outaouais

Mario Laframboise President, Conseil régional de développement de l'Outaouais

Jean-Luc Riopel Industrial Commissioner, Corporation de développement économique de Mirabel, Municipalité régionale de comté de Mirabel, Ville de Mirabel

Robert Michaud Chairman, Legislative Board of Quebec, United Transportation Union

Daniel Giroux Vice-President and Director of Operation, SGL Canada Inc.

Alain Blais Planning Director, SGL Canada Inc.

Robert Leduc Plant Engineer, SGL Canada Inc.

Roger Lemoine Vice-President, Re-Sources Deux-Montagnes

Alain Labonté Service de réglementation et programmes en transport multimodal,

Jacques Ruel ministère des Transports du Québec

Richard Montpetit Director General, Syndicat des producteurs de bois Outaouais-Laurentides

W. Wayne Schlote Canadian Refractories/Indresco Canada Inc./Marelan Works,

Tony Audi Director (traffic and distribution), Nora Beverages Inc.

Suzanne Aubin-Rivard Director, Transportation Service, Industries James Maclaren Inc.

Denis Paquet Head of Division, Transportation of goods, Hydro-Québec

Normand Parisien Director and Coordinator, Transport 2000 Québec

G.D. Housch Vice-President, Brotherhood of Maintenance of Way Employees

A. Demers Brotherhood of Maintenance of Way Employees

R. Della Serra

Robert Tirelli

Sylvain Delorme

Marcel D'Anjou Société ferroviaire de l'Outaouais et des Basses Laurentides

Jean Lamontagne

Benoît Brunet Brotherhood of Locomotive Engineers

Michel Belhumeur Public interest

BACKGROUND

On May 24, 1994, Canadian Pacific Limited (hereinafter CP) filed an application with the National Transportation Agency (hereinafter the Agency) for authority to abandon the operation of the segment of the Lachute Subdivision from a point near Sainte-Thérèse (mileage 28.0) to a point near Thurso (mileage 90.1) (hereinafter the branch line). A map of the Lachute Subdivision is attached as Appendix 1.

Section 161 of the National Transportation Act, 1987 (hereinafter the NTA, 1987) provides that any person may oppose an abandonment application by filing with the Agency not more than sixty (60) days after the last date of the notice of application a written statement setting forth the grounds on which that person opposes the application.

The Agency received numerous submissions during the intervention period. A list of parties of record is attached as Appendix 3. Pursuant to section 163 of the NTA, 1987, the Agency issued a notice of interim actual loss on August 24, 1994, for the prescribed financial years 1991, 1992 and 1993. The interim determination indicated that CP incurred losses of $939,223, $635,052 and $864,094 in the operation of the branch line in the prescribed financial years. This notice invited the general public to provide evidence establishing whether there is a reasonable probability that the branch line could become economic in the foreseeable future or whether the operation of the branch line is required in the public interest.

Section 164 of the NTA, 1987 requires the Agency to determine whether the branch line is economic, and, if it is uneconomic, whether there is a reasonable probability of its becoming economic in the foreseeable future. If the Agency finds that the branch line is uneconomic and that there is no reasonable probability of its becoming economic in the foreseeable future, it is required under subsection 165(1) of the NTA, 1987 to order the abandonment.

If there is a reasonable probability that the branch line will become economic in the foreseeable future, the Agency still must order that the operation of the branch line be abandoned unless it determines that the continued operation of the branch line or a segment thereof is in the public interest in accordance with sections 166 and 167 of the NTA, 1987.

Having reviewed the submissions filed, the Agency determined that a public hearing should be held to consider the application. The Agency issued its notice of public hearing on September 23, 1994.

At the end of the first day of the public hearing on October 24, 1994, the Agency postponed the hearing until November 22, 1994, as was requested by the legal advisers of the Conseil régional de développement de l'Outaouais, the municipalités régionales des comtés of Argenteuil, Papineau and Mirabel and of the Corporation de développement des Laurentides, as well as other interveners.

EVIDENCE

Carload Traffic

CP provides rail service between Sainte-Thérèse and Marelan on a "as required basis", presently three times a week on average, using a wayfreight train out of Montréal, Quebec. There is currently no demand for service on the Lachute Subdivision west of Marelan to a point near Thurso (mileage 90.1).

Carload traffic on the branch line in prescribed financial years 1991, 1992 and 1993 was as follows:

Stations	1991		1992		1993
	In	Out	In	Out	In	Out
Lachute	118	1	52	1	46	0
Marelan	147	188	174	58	140	45
Papineau	0	0	0	0	1	0
Total	454		285		232

Traffic on the branch line consists mainly of outgoing or incoming paper packaging, bonding cement, refractory brick and magnesium products.

At the public hearing, CP submitted an analysis of the break-even point of the branch line, based on the 1993 traffic mix. According to this analysis, this branch line would require 1,538 more carloads than were shipped in 1993 (traffic originating or terminating on the branch line) in order to reach the break-even point.

CP indicated that, in addition to the traffic originating or terminating on the branch line, 8,055, 7,548 and 1,311 carloads were bridged over the Lachute Subdivision in 1991, 1992 and 1993, respectively. Since March 1993, there was no traffic bridged between Montréal and Ottawa over this subdivision as there is no traffic originating or terminating on the segment between Marelan and Thurso, and as there is no demand; due to projected major maintenance costs, CP said it is more efficient to serve customers between Thurso and Hull from the main line passing through Bedell, south of Ottawa.

CP stated that the operation of the branch line resulted in an actual loss in each of the prescribed financial years and it was of the view that the branch line in question is uneconomic. It said it is not aware of any plans to develop resources in the area or any industrial development projects in the surrounding municipalities requiring rail services. Consequently, CP was of the view that there is no reasonable probability that the operation of the branch line will become economic in the foreseeable future.

Public Support for Existing Shippers

Considerable support was shown by many interveners for the existing shippers on the branch line, i.e. SGL Canada Inc., Canadian Refractories/Indresco Canada Inc. and Les Papiers Perkins Ltée. It was their position that the abandonment of the operation of the branch line would adversely affect current and future users because they would be forced to ship by truck, which will increase their transportation costs and will represent additional costs for the accommodation of suitable facilities for the receiving and loading of their products.

SGL Canada Inc.

SGL Canada Inc. (hereinafter SGL) is located in the Lachute industrial park at mileage 42.56 of the Lachute Subdivision. The company employs over 100 persons and manufactures graphite electrodes. The plant serves the steel mill and foundry market. Most of its production is intended for the Canadian market; however it exports 25 percent of its production to the United States and approximately 15 percent to the European and South American markets.

To manufacture graphite electrodes, SGL uses petroleum coke and coaltar pitch from Oklahoma and Kentucky (USA) respectively, which are received by rail via Montréal. Its finished products are shipped only by truck, for economic reasons.

The tables below show past and future shipments arriving at SGL.

Past shipments by rail
Year	Product	Carloads
1991	Petroleum coke/Coaltar pitch	32
1992	"	27
1993	"	40

Projected rail traffic
Year	Product	Origin	Carloads
1994-1996	Petroleum coke/ Coaltar pitch	Oklahoma Kentucky	20 a year 30 a year

SGL estimated that, as a result of the abandonment, its annual costs would increase by $828,005, including $426,005 in recurring transportation and customs clearance costs.

During cross examination, CP suggested that SGL use its intermodal service to ship its raw materials to its Lachute plant, if the branch line is abandoned. This service would involve shipping the raw material by rail to Montréal, where it would be transshipped by tank truck to the Lachute plant. The additional costs related to this means of shipment would result in annual recurring transportation costs of approximately $88,315, which is $337,690 less than SGL's estimate.

SGL stated that this is one way of reducing its transportation costs, but it is extremely important to maintain the integrity or quality of its products. To this end, SGL indicated that it has not received all possible guarantees from the trucking companies that CP suggested it use to transship its raw materials by truck.

If the branch line were to be abandoned, SGL would have to invest $402,000 in new facilities to receive raw materials delivered by truck. It would have to add a second coaltar pitch storage tank and install a new weatherproof storage area for petroleum coke. According to SGL, these modifications would be required to maintain the quality of the raw materials required for continuous operation.

SGL was of the opinion that these additional expenses would affect its production costs and place it in an unfavourable position in the internal and external markets. According to SGL, it is therefore crucial to maintain all essential factors involved in its plant's efficiency and productivity.

In conclusion, SGL requested the Agency not to order the abandonment of the branch line.

Canadian Refractories/Indresco Canada Inc.

Canadian Refractories/Indresco Canada Inc. (hereinafter Canadian Refractories), located in Marelan, near Grenville, produces mortars and refractory brick. The plant is linked to the Lachute Subdivision at mileage 55.2 via a private siding. The traffic generated by this company represents about 80 percent of the CP traffic moving over the branch line. It receives its supply of raw material principally by rail, and ships most of its products by truck.

The tables below illustrate past and projected incoming and outgoing shipments by rail of Canadian Refractories.

Past shipments by rail
Year	Raw material	Carloads	Outgoing product	Carloads
1991	Lignin Magnesium Sand	147	Brick	186
1992	Lignin Magnesium Sand Chemicals	174	Bonding cement Brick Magnesium	58
1993	Lignin Magnesium Sand	140	Bonding cement Brick	45

Projected rail traffic
Year	Raw Material	Carloads	Outgoing Product	Carloads
1994	Magnesium Lignin	174	Bonding cement	120
1995	Magnesium Lignin	233	Bonding cement	130
1996	Magnesium Lignin	280	Bonding Cement	140

Canadian Refractories noted that 1994 was the first year since 1990 that its volume of refractory brick increased. This increase was due, inter alia, to the transfer of part of the production of bricks from the Chicago plant to Marelan. The company had to increase its supply of raw materials shipped by rail, which accounts for the traffic projections above.

When questioned by Agency counsel regarding an increased use of rail as opposed to truck transportation, Canadian Refractories stated that it did not foresee an increase in the use of rail transportation for the shipment of its products, given that its products consist mainly of bricks and noting that historically, this mode of transportation caused damage to its shipments.

If the branch line were to be abandoned, Canadian Refractories estimated that beginning in 1995, its annual transportation costs would increase by at least $250,750. It explained that on October 20, 1994, CP proposed an alternative means of shipping its products terminating and originating on the branch line.

With respect to supply, raw materials would continue to be shipped by CP to Montréal, where they would be transferred and rerouted by truck to the Marelan plant. This would cost an additional $8 per ton. Consequently, Canadian Refractories estimated that the additional transportation costs for 1995 would be $167,550, given the estimated volume of 233 carloads for 1995 and calculating $8 per ton, for loads of approximately 95 tons per car.

Regarding shipment of its finished products, CP proposed, according to Canadian Refractories, to pick them up at the plant and ship them by truck to Boisbriand, where they would be transferred and rerouted by rail to their final destination. The rail rate from Boisbriand to the destination is the same as if the shipment left from Marelan; the increased cost represents the cost of shipping the products from the plant to Boisbriand by truck, i.e. $640 per carload, or $10 per ton. If this $10 per ton is applied to the projected 130 carloads to be shipped in 1995, transportation costs would increase by $83,200.

In its August 18, 1994 reply, and as it reiterated during the public hearing, CP stated that the most optimistic traffic forecasts for SGL and Canadian Refractories for 1996 indicate an increase of only 245 carloads over the 1993 level. This additional carload volume would represent only a very small reduction in the losses incurred in the operation of the branch line. Furthermore, CP pointed out that these two users ship most of their finished products by truck, and have not indicated any intention of changing this practice.

Les Papiers Perkins Ltée

Les Papiers Perkins Ltée (hereinafter Papiers Perkins) is located in Lachute and specializes in manufacturing paper and folding paperboard products.

Papiers Perkins did not oppose the abandonment application. However, some interveners stated that it uses both road and rail transport.

In its reply dated August 18, 1994 and during its testimony at the public hearing, CP noted the steady decline in traffic generated by Papiers Perkins over the last three prescribed financial years. CP also pointed out the fact that the company did not oppose its application. Consequently, no future traffic projections with respect to this user were brought forward. CP stated that it would, nonetheless, be willing to offer this company its intermodal service if the Agency granted its application to abandon the branch line.

Potential shippers

Nora Beverages Inc.

Nora Beverages Inc. (hereinafter Nora), a water bottling firm located in Mirabel, imports about 4 million pounds of resin a year from the U.S., which it uses to make plastic bottles on site. It receives its supply of resin by truck from Tennessee or New York. CP transports the bottled water for the export market by truck from Mirabel to Montréal, where it is transferred to rail for Canadian and U.S. destinations.

Nora stated that by saving 2 cents per pound of resin shipped by rail, it could save $80,000, based on incoming shipments of 4 million pounds of resin in the first year. The firm has a 30 percent rate of growth and plans to increase its resin supply, since it will be acquiring plastic bottle blowing machines.

Its resin supply will reach 20 million pounds over five years, which represents a saving of $400,000. This option would, however, require the construction of a private siding from its plant to the CP main line at mileage 39.6.

In its letter of August 18, 1994, CP stated that the possibility of direct rail service has been discussed since 1989; however Nora does not see the construction of a siding, at an estimated cost of $275,000, as a profitable business investment. According to CP, in May 1994, Nora informed CP that it had no reason to oppose the abandonment application. Nora also told CP that its current practice of trucking to the nearest railhead is more economical than the construction of a siding and the direct shipping by rail. During the public hearing, CP confirmed that Nora has become a major customer, and is using more and more often its intermodal services.

During the public hearing, Nora stated that if the operation of the branch line were maintained, it was planning to possibly increase the capacity of its facilities in 1995, and invest in the construction of a private siding. With its savings on transporting resin by rail, the cost of constructing a private siding would be amortized over the next three or four years.

City of Lachute

During the public hearing, the mayor of the city of Lachute pointed out the potential of the industrial park of Lachute. This park serves SGL and Christini. The latter expects to extend its operations by 1996 for the manufacturing of felt or woven fabric for paper mills. The expansion of Christini would represent a twenty-million-dollar investment if the entire project is implemented in one phase and would generate 100 jobs in Lachute. The mayor of Lachute added that if Christini wishes to serve all of Canada, the railway would certainly be an asset for this company.

As for potential traffic generated by this company, the mayor declared that he had no precise details as to the volume of traffic, the type of products and the incoming and outgoing traffic.

Syndicat des producteurs de bois Outaouais-Laurentides

The Syndicat des producteurs de bois Outaouais-Laurentides (hereinafter the Syndicat), is a non-profit organization whose role is to ship all types of wood to various plants in its area. The organization's main activity is marketing. It also seeks new market opportunities outside its territory, outside the province, and outside Canada, and in the United States.

Since 1993, efforts have been aimed more towards new markets for wood not being used by local plants. Dealing with outside markets involves extremely long trucking distances. The use of rail transportation would solve the problem of how to ship to outside markets.

Since September 1994, wood from the Pontiac region has been transported by truck to CP's loading point in Buckingham, and sent by train to Montréal via Ottawa, where it is rerouted to Canadian and American destinations. According to the Syndicat, the first trial train shipments looked very promising.

According to the Syndicat, the search for new markets and the economic situation also increase the possibility of examining other systems, such as establishing storage or marshalling points near major roads and close to the railway line, for example, Montebello and Lachute.

The Syndicat would like the operation of the branch line to be maintained to ensure the economic viability of the forestry industry in the short and long term.

During cross-examination by CP, the Syndicat could not provide projections of traffic over the branch line. However, it stated that it would be willing to discuss the establishment of lumber concentration yards with CP.

La Scierie Carrières/Les Séchoirs Lachute Inc.

La Scierie Carrières harvests the forests and ships the wood to the Lachute sawmill. From there, the wood is shipped by truck to Montréal for drying and then sent by container via road or rail for export to European or American markets.

Recently, the drying operations have been performed by Les Séchoirs Lachute Inc., whose facilities are located in the industrial park, approximately 2,000 feet from the branch line. The president of Les Séchoirs Lachute Inc., stated that the company would use CP services, but could not specify a potential traffic volume.

The president of Les Séchoirs Lachute Inc. also declared that an American firm located in Texas wishes to become associated with it in order to purchase wood from La Scierie Carrières and reship it by rail to American destinations. The abandonment of CP rail service would jeopardize the establishment of this American firm in Lachute and the creation of twenty jobs. No concrete projections regarding rail use by this American firm could be provided.

Conseil régional de développement de l'Outaouais

The Conseil régional de développement de l'Outaouais (hereinafter the Conseil) stated that the Outaouais region contains 40 percent of Quebec's hardwood forests. It indicated that a major forestry project worth several billion dollars may be implemented within two years. A firm is considering establishing itself in the region and processing hardwood to manufacture high-quality paper. Basing its figures on a plant of this type, such as Avenor, the Conseil estimated the potential rail traffic generated by this firm to be thousands of carloads per year.

During cross-examination, the Conseil made it known that if the operation of the branch line were to be abandoned, a site such as Montebello could not be suggested to this firm, as there would be no assurance of a mode of transportation for its products.

Sylvio Brunet & Fils Ltée

In its submission filed with the Agency, Sylvio Brunet & Fils Ltée, located at Fassett (mileage 70.8), informed the Agency that using rail is a possibility but it did not provide any projections.

Les Industries James Maclaren Inc.

Les Industries James Maclaren Inc. (hereinafter Maclaren), a paper manufacturer, has two plants. One is located in Masson-Angers and manufactures 200,000 metric tons of newsprint annually. The other plant is in Thurso and manufactures 250,000 metric tons of kraft pulp per year. Approximately, twenty-eight percent of the aforementioned volume is shipped by rail.

Since March 1993, all Maclaren traffic has been directed toward Ottawa and Bedell, before being rerouted east or west. Freight rates have remained the same as those in force before the method of operation changed. Maclaren states that eastward traffic loses one delivery day which has forced it to modify its production schedules accordingly. In order to meet deadlines, some of its customers are served by truck; however, shipments by truck are more costly.

Maclaren favoured the continued operation of the branch line for its eastward traffic. For this purpose, it was in favour of a short-line railroad.

In response to CP's cross-examination regarding the additional day's delay for its eastbound traffic, Maclaren stated that all eastbound traffic originating from its plants requires an additional day. However, Maclaren indicated that the route currently used produces, on the whole, the same overall result as before, given that 50 percent of its traffic flows eastward and 50 percent flows westward, and the westbound traffic gains a day.

SEGMENTATION

Ministère des Transports of the province of Quebec

In its submission dated July 14, 1994, the Ministère des Transports of the province of Quebec (hereinafter the Ministère) noted the absence of traffic, either current or potential, on the segment of the Lachute Subdivision between Thurso and Marelan, and stated that abandonment of the operation of this segment would have no significant impact on the economy of the region. However, it asked the Agency to make a separate determination under section 164 of the NTA, 1987 with respect to the segment of the branch line between Marelan (mileage 55.2) and Sainte-Thérèse (mileage 28.0), a total distance of 27.2 miles. Its request was based on the volume of traffic on this segment of the Lachute Subdivision as well as the project of Nora.

At the public hearing, CP indicated that it registered a deficit in the operation of the Marelan - Sainte-Thérèse segment of about $360,000 in 1993, and that to break even the segment requires over 680 carloads more than the 1993 level or a freight rate increase of over 55 percent.

Conseil Régional de Développement de l'Outaouais et al.

The Conseil Régional de Développement de l'Outaouais et al. [including itself, the municipalités régionales des comtés of Argenteuil, Papineau and Mirabel and the Corporation de développement des Laurentides] (hereinafter the CRDO et al.), in its written submissions of September and November 1994, and through the testimony of its witness, indicated that the actual losses attributable to the operation of the branch line should be adjusted in such a way that the revenues and costs associated with the handling of bridge traffic would be included. The specific costs the CRDO et al. noted especially for adjustment included the property taxes on line, the costs of on-line maintenance, the costs of depreciation of assets on-line, and the cost of capital of assets on-line.

The CRDO et al. argued that if the findings of the decision of the Railway Transport Committee of the Canadian Transport Commission dated January 22, 1979 and known as "The Main Line - Branch Line Decision" with regard to effective isolation were accepted in this case, the abandonment of the operation of the branch line would effectively isolate the line segment from Thurso to Lemieux Island in Ottawa because of the additional distance for traffic originating in Thurso destined to points at or beyond Montréal.

The CRDO et al. stated that, among other things, crew wages should be adjusted to reflect the savings that may be available for the operation of the branch line with reduced crews. The CRDO et al. advanced that revenues attributable to the operation of the branch line should be increased by the amounts that were earned by the Soo Line Railroad, a wholly-owned subsidiary of CP in the United States, which the CRDO et al. alleged moved some of the traffic after interchange with CP at Detroit, Michigan.

The CRDO et al. claimed that the bridge traffic should be included in the assessment of the economic viability of the branch line. As well, the CRDO et al. stated that the revenues generated by the line haul performed by CN for cars interswitched to CP at Montfort Junction should also be considered by the Agency.

Regarding the request by the CRDO et al. that the determination of the Agency as to the present and future economic viability of the branch line take into account the western segment of the Lachute Subdivision from Thurso to Lemieux Island, the reply of CP dated October 14, 1994, indicated that the railway company has the right to apply to abandon the operation of any line of railway or segment thereof. CP added that it did not segment the Lachute Subdivision by excluding the segment between Thurso and Lemieux Island from its application of May 23, 1994. According to CP, this segment has not been isolated from the remainder of the CP system since February 1993.

PUBLIC INTEREST

All those opposed were of the view that the continued operation of the branch line is essential to the future economic, industrial and commercial development of the regions concerned. In addition, the international scope of the industries; the impact on the development of the Lachute and Mirabel industrial parks and neighbouring municipalities; and the interregional nature of the railway line between Montréal and Hull must be considered. The abandonment of the operation of the branch line would jeopardize recovery in the forest, mining and construction industries in the areas concerned.

AUTHORITY OF THE AGENCY TO MAKE A DETERMINATION REGARDING THE ABANDONMENT APPLICATION

In its submission filed at the public hearing, Transport 2000 Québec cited the 1882 Quebec statute (Western Section of Québec, Montréal, Ottawa and Occidental Railway, c. 19, 45 Vic.), which is the act by which CP acquired the line and made a committment to operate the line.

In its final summation at the public hearing, CP stated that the Supreme Court's decision in Esquimalt and Nanaimo 1994 and the Federal Court of Appeal's decision in the matter of McCain's, 1993 clearly establish that such a statute does not prevent the National Transportation Agency from making a determination on the present abandonment application.

POSSIBILITY OF CREATING A SHORT-LINE RAILROAD

Subsection 174(1) of the NTA, 1987 regulates offers to purchase railway lines proposed to be abandoned. This subsection provides that any offer must come from any other "railway company that is authorized to operate the line or segment in order to continue to operate it". Therefore, any company submitting an offer to purchase under section 174 of the NTA, 1987 must be a railway company incorporated at the provincial or federal level.

In accordance with section 158 of the NTA 1987, a railway company may enter into an agreement with any other company in order to sell, lease or otherwise convey to the other company a line of railway without having abandoned the said line.

Interveners often stressed the importance of such a proposal before and during the public hearing.

On October 18, 1994, the Agency received a copy of a purchase offer submitted to CP by the Société ferroviaire de l'Outaouais et des Basses Laurentides (hereinafter SFO&BL), a company that was in the process of being incorporated. Pursuant to section 174 of the NTA, 1987, this offer concerned the purchase of the branch line at an agreed price corresponding to the net salvage value or at a price to be set by the Agency. Pursuant to section 158 of the NTA, 1987, the offer also covered the purchase of the Thurso-Hull segment of the Lachute Subdivision.

In a letter dated October 20, 1994, CP informed SFO&BL and the Agency that the Thurso-Hull segment was not for sale, and that SFO&BL was not a "railway company" within the meaning of section 174 of the NTA, 1987.

In a letter dated October 22, 1994, counsel representing SFO&BL informed the Agency and CP of its incorporation under the name 9005-5793 Québec Inc., pursuant to the Quebec Companies Act.

During the public hearing, given that CP rejected its offer, SFO&BL opposed the abandonment of the branch line and reiterated its interest in acquiring, under section 174 of the NTA, 1987, the branch line in question, and given its regional nature, under section 158 of the NTA, 1987, the segment of the Lachute Subdivision from Thurso to Hull. SFO&BL declared that the purchase and operation of only the branch line limits the possibility of its becoming economically viable; the purchase and operation of the entire line, i.e. from Mirabel to Hull, would enable it to reach an adequate level of economic viability.

For this purpose, SFO&BL asked the Agency to recognize the integrity of the entire line, namely from Mirabel to Hull; to authorize CP to abandon the operation of the branch line on the condition that it be sold to SFO&BL once it had obtained provincial authorization, but not before the conclusion of the sale; and that measures be taken, pursuant to the NTA, 1987, to facilitate the sale or transfer of the line to a provincially incorporated company. According to SFO&BL, sections 174 and 158 of the NTA, 1987 do not deal with this specific transaction; it was therefore crucial that the interpretation and application of these sections of the Act take this reality into account and enable such a transaction to be carried out.

In its final summation at the public hearing, CP declared that an offer to purchase by a short-line railroad, pursuant to section 174, can only apply to the specific line or segment thereof that is the subject of an abandonment application.

CP also added that the Agency has power with respect to the conveyance of lines under section 158 of the NTA, 1987. It declared that this section applies only when an agreement exists between the buyer and seller regarding the terms and conditions of the conveyance.

In its letter of October 20, 1994, CP indicated that it did not wish to sell the segment between Thurso and Hull. Consequently, it is clear that section 158 of the NTA 1987 cannot apply to SFO&BL's proposal.

POSSIBILITIES OF PASSENGER SERVICE

Some parties raised the possibility of operating a train for tourists between Hull and Montebello and using the Lachute Subdivision for conventional or high-speed passenger service between Ottawa and Montréal.

CP said that it was not aware of any proposal or decision relating to these possibilities.

CONDITION OF HIGHWAY SYSTEM

Many interveners expressed concern about the accelerated deterioration of the highway infrastructure if rail traffic converts to trucks. The highway system could not accommodate the increased traffic because Highways 148, 105, 307, 309 and 158 have already exceeded their capacity for trucks carrying wood and other goods. Highways 50 and 13 are still not completed.

Interveners pointed out that the railway line is the only link between the Outaouais and Montréal except for Highway 148. Consequently, abandonment of the branch line will further isolate the region.

Rail transport is essential to reduce the problems caused by seasonal restrictions on highway carriers.

CP noted that trucking firms already satisfy a substantial proportion of the demand for local transport, as evidenced by the current low volumes of rail traffic.

CP is of the view that the added impact of truck traffic on local roads would be minimal, as it would be equivalent to two semi-trailers a day in each direction, assuming 300 business days a year and a ratio of 2.5 semi-trailers to one carload.

DEMARKETING

Certain interveners placed great emphasis on efforts to market the Lachute Subdivision. They commented on the underuse of the Lachute Subdivision's current potential. By modifying its management methods, improving services, investing in facilities to adequately serve the industrial parks and increasing train frequency, CP could increase its share of the freight transportation market in the area.

CP pointed out that visiting potential clients and telemarketing were only one aspect of its many efforts to market its services. CP noted that its sales representative must prioritize major customers, such as Canadian Refractories, SGL and Nora, and, in addition, must deal with other shippers and identify and support companies with a potential to generate rail traffic.

In their testimonies, the economic development commissioner for Argenteuil and the industrial commissioner for Mirabel recognized that CP's industrial expansion representatives were very cooperative regarding proposals involving railway traffic potential. Furthermore, Nora and SGL mentioned that the CP sales representative met their needs efficiently and consistently.

ENVIRONMENT

Certain interveners stated that the abandonment of the branch line would increase truck traffic and traffic-related accidents, thereby adversely affecting the safety and quality of life of residents.

In addition, they argued that the primary cause of pollution linked to various modes of transport is the use of petroleum as an energy source. The conversion from rail to road transport would aggravate the already serious problem of atmospheric pollution.

One intervener pointed out that, regarding land use, a line of railway requires a right-of-way of 15 metres wide, on average, but a six-lane highway covers almost three times that area. Thus, roads and highways require the expropriation and acquisition of very large areas of land compared with railways. Use of the railway as a mode of transport helps to conserve the environment.

RAILWAY POLICY

Interveners requested that the Agency impose a two- to five-year moratorium on the abandonment of the operation of the branch line until an essential national system is established, and consider, in making its determination, that the branch line is an interregional link and a part of Quebec's basic railway system.

Aside from the foregoing, the Ministère informed the Agency in its submission dated November 22, 1994 that the Quebec government intended to accelerate its discussions on railway policy with the federal government. It will request that the federal government:

- stop the disorganized dismantling of the railway system, which is taking place to the detriment of Quebec's economic interests;

- delay any decision regarding the proposal to merge the operations of the CN and CP railway systems east of Winnipeg, until it has made its policy on railway transportation known and has reached an agreement with the provinces concerned;

- establish a financial aid program to restore railway lines for short-line railroad use, in order to compensate for the negative impact of the sale of lines in poor condition on proposals to create short-line railroads and on the viability of new firms; and

- amend the NTA, 1987 as required so as to govern the relationships and settle disputes between (national and local) railway carriers regarding traffic interchange and revenue sharing.

SUPPORT FOR THE ABANDONMENT PROPOSAL

The Township of Grenville asked CP to remove its facilities within municipal boundaries.

AGENCY FINDINGS

Preliminary Issues

Most interveners identified demarketing strategies. However, since the Agency has received no complaints regarding service under subsection 147(1) of the NTA, 1987, it concludes that CP has met shippers' expectations with regard to current and potential rail service.

With respect to the imposition of a moratorium on the abandonment of the branch line, as requested several times by interveners, it should be noted that this area is not within the Agency's jurisdiction. Any such request must be submitted to the federal Minister of Transport.

With respect to the position of Transport 2000 Québec, that the statute by which CP acquired the branch line requires its continued operation, the Agency notes that CP is the operator of the line and that it can apply for abandonment under the provisions of the NTA, 1987.

Scope of the Application

In the course of the public hearing, the Agency ruled that the scope of the determinations to be made by the Agency with respect to the consideration of an abandonment application was clear from the NTA, 1987, and particularly section 157 of the Act. The Agency also reaffirmed that it would follow the principles enunciated in the Main Line - Branch Line Decision. Consequently, the Agency rejects the arguments raised by the CRDO et al. concerning the adjustment of revenues and costs involving bridge traffic, and that the line segment between Thurso and Lemieux Island would be effectively isolated. With respect to this latter point, the Agency is of the view that CP is entitled to organize the operation of its system to its advantage, and the additional distance to be travelled in moving this traffic is not unreasonable when considered in comparison with the savings that are anticipated from the abandonment of the operation of the branch line.

Based on all evidence provided and on file, the Agency has made the necessary adjustments to the costs attributable to the operation of the branch line as detailed below. Further adjustments to crew wages of the sort suggested by the CRDO et al. are rejected.

Further, the Agency notes that the provisions of section 157 of the NTA, 1987 specify the inclusion of revenues earned by CP for traffic originating or terminating on the branch line. The Soo Line Railroad is not the applicant in this case, and the Agency cannot include the revenues that the Soo Line Railroad may or may not have earned handling this originating or terminating traffic.

Actual Losses

In accordance with section 163 of the NTA, 1987, the Agency reviewed the statements of actual loss filed by CP attributable to the operation of the branch line in the prescribed financial years 1991, 1992 and 1993. On August 24, 1994, the Agency issued an interim determination of the actual loss attributable to the operation of the branch line in each of the prescribed financial years and solicited submissions from interested parties.

Having reviewed all submissions filed by the parties and the evidence presented at the public hearing, in accordance with the provisions of the Railway Costing Regulations, SOR/80-310, and of section 157 of the NTA, 1987, the Agency made the following final determination of actual loss for 1991, 1992 and 1993:

Year	Total costs $	Revenues $	Actual loss $
1991	2 006 004	1 069 680	936 324
1992	1 372 989	742 963	630 026
1993	1 525 244	631 925	893 319

A disallowance of crew wages costs for a second brakeman, including all associated overheads, was made for the three prescribed years as there is no requirement for a second brakeman for the efficient movement of traffic.

As disclosed by the Agency's verification, and as stated by CP during the public hearing, some carloads were erroneously excluded from CP's 1993 reported figures. Revenues have therefore been increased by $4,379 to account for interswitching revenues from 11 carloads (SGL traffic) moved on behalf of CN. The variable cost of those carloads, amounting to $2,866 was added to the total costs attributable to the operation of the branch line.

A further adjustment for the 1993 financial year was required to reflect the Agency's decision which set CP's 1993 cost of capital rate at 12.3 percent.

A breakdown by major cost category of the principal factors applied in determining the amount of actual loss is attached as Appendix 2.

Economic Determination

In accordance with section 164 of the NTA, 1987, the Agency is required to determine whether the branch line or any segment thereof is economic and, if it is not, whether there is a reasonable probability of its becoming economic in the foreseeable future.

The Agency determined that CP incurred actual losses of $936,324, $630,026 and $893,319 in 1991, 1992 and 1993, respectively. The Agency finds that traffic originating and terminating on the branch line has been diminishing since 1991 and there is no demand for rail service beyond Marelan (mileage 55.2) to a point near Thurso (mileage 90.1). Consequently, the Agency determines that the operation of the branch line is not presently economic.

Probability of the Branch Line Becoming Economic

After review of the submissions filed before and during the public hearing, the Agency notes the following.

As to the traffic projections of SGL, the Agency finds that its projections indicate essentially the same traffic volumes as previous years; therefore, SGL does not have any intention of increasing its use of rail service.

The Agency also notes that Canadian Refractories anticipates higher volumes of traffic due to the transfer of a major production line to its Marelan plant. However, it does not foresee increasing its use of rail service for its shipments of brick.

The Agency notes the potential resin traffic generated by Nora, i.e. 110 carloads, with a 30 percent growth per year, and that this potential traffic is based on the construction of a private siding. In its testimony at the public hearing, Nora stated that if the operation of the branch line were not abandoned, it would seriously consider constructing a private siding.

Papiers Perkins did not intervene in the abandonment proceeding and the Agency must conclude that it has no need for CP rail service.

In its intervention to the Agency, Sylvio Brunet & Fils Ltée stated that it may use CP services in the future, but submitted no potential future traffic projections.

The potential rail traffic of the Syndicat des producteurs de bois Outaouais-Laurentides originates in the Pontiac region. This traffic is currently trucked to CP's transshipment point in Buckingham for shipment by rail to various destinations. The Agency notes that the said transshipment point is not located on the branch line and is beyond the scope of this abandonment proceeding. Furthermore, the Syndicat could not specify any potential traffic volume originating or terminating on the branch line.

The Agency also notes the potential of other projects likely to require rail services, such as Christini, Les Séchoirs Lachute Inc. and the Conseil régional de développement de l'Outaouais; however, no traffic projections were advanced that could help to make the operation of the branch line economic in the foreseeable future.

Maclaren is not located on the branch line and its Thurso and Masson-Angers plants continue to be served by CP on the Lachute Subdivision, from Ottawa.

The Agency rejects the arguments made by the CRDO et al. regarding the inclusion of the bridge traffic in its determinations of the present and future economic viability of the branch line, for the reasons already advanced. The Agency notes that CP has included, in its statements of actual loss, an appropriate reduction to costs incurred, as a result of traffic bridging over the branch line.

With regard to the traffic that CP interchanges with CN at Montfort Junction, the Agency may only consider the relevant costs, revenues and traffic during the prescribed period as well as any appropriate changes to these factors that may occur in the foreseeable future.

The Agency reviewed the request by the Ministère des Transports of the province of Quebec in which it asked the Agency to segment the line from Marelan to a point near Sainte-Thérèse and rejects this request considering the extent of the actual losses attributable to the operation of the branch line, the present and future traffic levels and the lack of potential shippers.

After consideration of the evidence filed before and during the public hearing, the Agency determines that there is no reasonable probability of the operation of the branch line becoming economic in the foreseeable future.

OTHER ISSUES

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.

Railway Policy

During the public hearing, the Agency noted the desire of parties concerned to maintain an interregional railway connection between the Montréal region and the National Capital Region.

The Agency is of the opinion that section 174 of the NTA, 1987 applies only to the segment of the railway line that is the subject of this abandonment proceeding. In this case, traffic that may ensure economic viability originates or terminates outside the branch line and CP has segmented the line of railway so as to keep this traffic in order to keep the long-distance shipping market. The NTA, 1987 allows such a segmentation and the measures taken by CP to this effect are within this Act. The legislation as it currently stands prevents the Agency from considering factors such as the need for an interregional railway, the examination of ways to maintain such connections and recommending, as a minimal measure, or ordering, as a maximum measure, provisions appropriate for the maintenance of this connection.

CONCLUSION

Consequently, after reviewing all the evidence, the Agency finds that, pursuant to section 164 of the NTA, 1987, the branch line is presently uneconomic and that there is no reasonable probability of its becoming economic in the foreseeable future.

In accordance with subsection 165(1) of the NTA, 1987, the Agency must order the abandonment of the operation of the Lachute Subdivision between a point near Sainte-Thérèse (mileage 28.0) and a point near Thurso (mileage 90.1), a total distance of 62.1 miles, in the province of Quebec.

In accordance with the provisions of section 168 of the NTA, 1987, the Agency shall fix the date of the abandonment of the operation of the branch line not less than thirty (30) days or more than one (1) year from the date of the abandonment order. According to the evidence submitted, the Agency is of the view that certain shippers will require a period of time to make alternative transportation arrangements. The Agency also notes that several parties were highly favourable to the continued operation of the branch line as a rail interregional link and that it continue to be operated by a provincial interregional railway company. Consequently, it has set the date of abandonment at six months following the date of the order giving effect to this Decision.

An order to this effect will be issued.