Agency Rulings

Decision No. 690-R-2002

December 24, 2002

APPLICATION by Montreal, Maine & Atlantic Railway, Ltd. and the Montreal, Maine & Atlantic Canada Company, pursuant to section 91 of the Canada Transportation Act, S.C., 1996, c. 10, for a certificate of fitness permitting:

a) Montreal, Maine & Atlantic Railway, Ltd. to operate a railway

- between the Canada/United States border at mileage 32.63 of the Newport Subdivision and the Canada/United States border at mileage 43.32 of the Newport Subdivision;

- between the Canada/United States border near Saint-Léonard, New Brunswick and Saint-Léonard, New Brunswick;

- by virtue of a running rights agreement, on the Canadian National Railway Company's Napadogan Subdivision between Saint-Léonard and Cyr Junction, New Brunswick; and

- by virtue of a running rights agreement, on the Canadian Pacific Railway Company's Edmundston Spur between Cyr Junction and Grand Falls, New Brunswick

b) the Montreal, Maine & Atlantic Canada Company to operate a railway:

- between Saint-Jean, Quebec and Lennoxville, Quebec; between Ste-Rosalie, Quebec and Farnham, Quebec; between Farnham, Quebec and Stanbridge, Quebec; between Brookport at mileage 0.0 of the Newport Subdivision and the Canada/ United States border at mileage 26.25 of the Newport Subdivision;

- between Lennoxville, Quebec and the Canada/United States border near Boundary, Quebec, and

- by virtue of an interchange agreement with the Canadian Pacific Railway Company, on the Canadian Pacific Railway Company's Adirondack Subdivision between Saint-Jean, Quebec and Saint-Luc Junction, Quebec.

File Nos. R 8005/M5
R 8005/M6

On October 24, 2002, Montreal, Maine & Atlantic Railway, Ltd. (hereinafter MMA) and its wholly-owned subsidiary, the Montreal, Maine & Atlantic Canada Company (hereinafter MMAC), applied to the Canadian Transportation Agency (hereinafter the Agency) for the certificate set out in the title.

MMA and MMAC acquired the lines of railway of the Bangor and Aroostook Railroad Company and its wholly-owned subsidiary, the Van Buren Bridge Company, and those of the Quebec Southern Railway Ltd., and the Canadian American Railroad Company, in Canada, following the bankruptcy of those companies.

Subsection 90(1) of the Canada Transportation Act (hereinafter the CTA) provides that no person shall construct or operate a railway without a certificate of fitness. Section 87 of the CTA provides, in part, that a "railway" means a railway within the legislative authority of Parliament.

The Agency finds, based on the information on file, that MMA is subject to federal jurisdiction, by virtue of paragraph 88(2)(a) of the CTA, as it is a company operating a railway from the United States into Canada. The Agency also finds that MMAC is also subject to federal jurisdiction, by virtue of paragraph 88(2)(b) of the CTA, as it is a wholly-owned subsidiary of MMA, a proposed railway within the legislative authority of Parliament.

Subsection 92(1) of the CTA requires that the Agency issue a certificate of fitness for the proposed operation of a railway if the Agency is satisfied that there will be adequate liability insurance coverage for the proposed operation.

With respect to the adequacy of the insurance coverage, the Agency has reviewed the material filed and is satisfied that there will be adequate third party liability insurance coverage, including self-insurance, for the proposed railway freight operations of MMA and its wholly-owned subsidiary, MMAC. The Agency notes that there is not sufficient information on file to make a determination on the adequacy of the insurance coverage for the proposed passenger operations on the subject lines of railway. As such, the Agency will not issue a certificate of fitness for the proposed passenger operations. Once MMA and MMAC have negotiated with future passenger operators to carry out operations on their lines, they may apply to the Agency for such an authority.

The Agency's review of MMA and MMAC's financial capability to self-insure for the amount of self-insured retention was based on the confidential financial information of the parent company, MMA, and the indemnity agreement between MMA and MMAC.

Accordingly, pursuant to subsections 92(1) and 92(2) of the CTA, the Agency will issue a certificate of fitness to MMA and its wholly-owned subsidiary, MMAC, authorizing them to operate a railway in Canada as set out in the title, restricted to freight operations.

In light of the indemnity agreement, MMA shall provide to the Agency a copy of its audited financial statements on an annual basis. Furthermore, MMA and MMAC shall provide the Agency with their annual loss history.

MMA and MMAC propose to commence their railway operations on December 30, 2002. Therefore, the certificate shall become effective on that date.

In light of the acquisition of the lines of railway by MMA and MMAC, the Agency cancels, effective January 1, 2003, Certificate of fitness No. 97018 issued to the Bangor and Aroostook Railroad Company and its wholly-owned subsidiary, the Van Buren Bridge Company, and Certificate No. 97019 issued to the Canadian American Railroad Company, both dated October 17, 1997.