Agency Rulings

Decision No. 491-R-1990

September 19, 1990

IN THE MATTER OF an application dated March 9, 1982 by the Quebec North Shore and Labrador Railway for authority to discontinue the passenger-train service operating between Schefferville and Sept-Îles and between Ross Bay Junction and Wabush/Labrador City, in the Provinces of Quebec and Newfoundland;

IN THE MATTER OF a Decision dated September 20, 1985 and Order No. R-38519 dated September 25, 1985 of the Railway Transport Committee which found the service to be uneconomic, and likely to remain so, and ordered the operation thereof not be discontinued; and

IN THE MATTER OF subsection 268(2) of the Railway Act, R.S.C., 1985, c. R-3, which stipulates that the National Transportation Agency shall reconsider an application for discontinuance of passenger-train services at intervals not exceeding five (5) years from the date of the original application or last consideration thereof.

File No. D 3255-QNSL

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BACKGROUND

The Quebec North Shore and Labrador Railway (hereinafter QNS&L) currently operates a dedicated passenger-train providing twice weekly service in each direction between Sept-Îles and Wabush/Labrador City and once weekly service between Ross Bay Junction and Schefferville. Previous to May 1, 1990, a mixed train provided the service.

Pursuant to subsection 268(2) of the Railway Act, the National Transportation Agency (hereinafter the Agency) must now reconsider the application for discontinuance at intervals not exceeding five (5) years from the date of the original application or last consideration thereof.

A public notice was issued on May 24, 1990, advising all interested parties that the Agency was reconsidering QNS&L's original application for discontinuance. Interested parties were invited to provide the Agency with submissions in respect of the reconsideration of the application within forty-five (45) days of the date of issue of the public notice.

SUBMISSIONS

QNS&L submitted its arguments in favour of the discontinuance in a letter to the Agency dated July 23, 1990. Essentially, QNS&L argues that, as a wholly owned subsidiary of Iron Ore Company of Canada Ltd. (hereinafter IOC), it was initially incorporated to transport shipments of iron ore from the interior, from Schefferville and Wabush/Labrador City, to Sept-Îles, and not to provide a passenger service.

Since the closure of IOC's mining operations in Schefferville in 1982, no iron ore shipment has been transported between Schefferville and Ross Bay Junction. In addition to this closure, mining operations in Labrador City were severely curtailed. Consequently, iron ore shipments have decreased substantially.

QNS&L confirms that the conclusion reached by the Railway Transport Committee in its September 1985 Decision and Order regarding QNS&L's passenger-train service, namely that it was uneconomic and likely to remain so, is still valid. Since 1985, losses have increased while revenue passengers have consistently decreased from 17,930 in 1986 to 14,623 in 1989. As a result, QNS&L indicated that it will not, indeed cannot, invest in new equipment because it would not attract increased ridership and would simply increase losses.

Contrary to the situation in 1985, communities served by the passenger-train now have a number of transportation alternatives. These alternatives include a scheduled air service between Sept-Îles and Schefferville and between Sept-Îles and Wabush/Labrador City; a highway linking Wabush/Labrador City to Fermont to Baie-Comeau; and a highway linking Labrador City to Ross Bay Junction.

QNS&L concluded its submission by stating that, given the unlikelihood of the passenger-train service ever becoming economic in light of decreasing ridership and increasing transportation alternatives, the only viable option is discontinuance.

The majority of interveners opposed the discontinuance of the passenger-train service and cited the adverse economic impact that discontinuance would have on the region as a whole.

The Governments of Quebec and of Newfoundland and Labrador, among other interveners, state that tourism is an ever increasing and important industry of the region. The Town of Labrador City describes tourism as "a needed diversification" of its single industry economy while the cities of Schefferville and Sept-Îles prominently mention the importance of the industry to their local economies. The ministère du Tourisme of the Government of Quebec provides data demonstrating the growth of tourism in the region over the past four years as well as outlining the potential development of the industry in the region. All interveners indicate that the industry is dependent on QNS&L passenger-train service as the primary means to attract tourists. Discontinuance of the service would adversely impact on the tourism industry of the region and, as a consequence, it would most likely not survive. Accordingly, all local service industries would suffer.

Another often mentioned reason cited for opposition is the high cost of the only alternative mode of transportation available. Air travel cost ($660.00 return between Schefferville and Sept-Îles as opposed to $98.45 by train), it is argued, is prohibitive for many in the region due to the modest incomes of the inhabitants.

Also mentioned are the formal commitments made by the Government of Quebec and the federal government, at the time of the closure of the Schefferville mine, to maintain essential services to the region. Interveners consider the passenger-train service to be essential as it is the only available means of surface transportation. It is perceived not as a luxury or even a privilege, but rather as a fulfillment of their right to a minimum level of transportation service. Given the above-mentioned commitments, it is argued that the Agency is obliged to deny discontinuance of the service.

It should be noted that many submissions also deal briefly with the future mining development of the region. It is maintained that if the region is ever to fulfill its potential mining development, a train service is essential.

ANALYSIS

In determining whether a passenger-train service should be discontinued, the Agency, pursuant to section 267 of the Railway Act, shall consider all matters which are relevant to the public interest. These matters include among others: the actual losses incurred in the operation of the passenger-train service; the alternative transportation services; the probable effect on other passenger carriers; and the probable future passenger transportation needs of the area served by the service.

Actual Loss Incurred

The Agency has determined that QNS&L passenger-train service has incurred the following actual loss during the referenced eligible claim periods:

Year	Actual Losses
	$
1985	1,340,245
1986	1,299,838
1987	1,519,958
1988	1,391,576
1989	1,737,620

This approved actual loss determination represents a reduction from QNS&L's submission. Even though QNS&L's submitted actual loss was adjusted, it does not detract from the fact that this service is uneconomic and will likely continue to be uneconomic.

The operational change from a mixed train to separate freight and passenger trains occurred too recently for any impact on actual losses to be observed. Passenger fares remain the same.

Alternative Transportation Services

Rail

There is no alternative rail passenger service available in the region.

Highway and Bus

There is no highway system linking Schefferville, Wabush/Labrador City and Sept-Îles, the three major communities on the line. Consequently, there is no bus service available as an alternative to the passenger train.

However, it should be noted that there is presently a road - Quebec Highway 389 - which connects Wabush/Labrador City with Fermont which in turn provides a connection to the North Shore of the St. Lawrence at Baie-Comeau (approx. 200 km south of Sept-Îles). There is no regularly scheduled bus service between these points but there are chartered bus tours which travel this route during the summer. The ministère des Transports of the Government of Quebec, responsible for the highway's use and maintenance, notes that the highway is often temporarily closed during the winter and during the spring thaw. Segments of the highway are deficient and must be rebuilt. However, there are no plans in the current five-year plan of the ministère to do so due to budgetary constraints. The ministère further advises that there are currently no plans to connect the highway to Schefferville.

It should also be noted that a gravel road connects the communities of Churchill Falls and Happy Valley-Goose Bay to QNS&L railway at Esker. Discontinuance of the passenger-train service would have an adverse effect on those communities as well as those points located on the line.

Please refer to Appendix 1 for illustration of regional surface transportation infrastructure.

Air

Regularly scheduled air service is available. Air Alliance and Intair provide daily flights during the week between Schefferville and Sept-Îles. Air fares are substantially higher than the rail fare. Air service is generally considered too costly for many inhabitants of the region.

Probable Effect on Other Carriers

Should the passenger-train service be discontinued, those passengers using the train would likely be required to use the air carriers as their travel mode. Those travelling to and from Schefferville in particular would have no alternative. Given the socio-economic characteristics of the region and its inhabitants, only a marginal increase in passenger air traffic may be expected.

Probable Future Transportation Needs of the Area

From 1986 to 1989, QNS&L carried an average of 15,708 passengers per year. Demographic figures for the area remain fairly constant since 1985; 1,300 for Schefferville, 15,000 in Wabush/Labrador City and 30,000 in Sept-Îles. Consequently, it is unlikely that transportation needs will vary in the foreseeable future.

CONCLUSION

The Agency finds that the passenger-train service provided by QNS&L between Sept-Îles and Schefferville and between Ross Bay Junction and Wabush/Labrador City, in the Provinces of Quebec and Newfoundland, is and is likely to remain uneconomic.

The Agency is of the view that the area continues to require rail passenger transportation due to the unreliability of roads connecting the major centres and the higher cost of air travel compared to rail. Therefore, the operation of this uneconomic service should not be discontinued.

An Order in accordance with the provisions of subsection 268(2) of the Railway Act is attached.