Decision No. 170-R-1989

March 30, 1989

March 30, 1989

IN THE MATTER OF the application by Canadian Pacific Limited for authority to abandon the operation of the Temiscaming Subdivision from Temiscaming (mileage 40.5) to Gendreau (mileage 47.9), a total distance of 7.4 miles, in the Province of Quebec.

File No. 39309.87

HISTORY OF THE APPLICATION

On July 8, 1988, Canadian Pacific Limited (hereinafter CP) applied to the National Transportation Agency (hereinafter the Agency), pursuant to section 160 of the National Transportation Act, 1987 , S.C. 1987, c. 34 (hereinafter the NTA, 1987), for authority to abandon the operation of a portion of the Temiscaming Subdivision, as identified above.

HISTORY OF THE LINE

The Temiscaming Subdivision was operated by the Interprovincial and James Bay Railway from its construction in 1912-1913 until it was leased to the Canadian Pacific Railway Company in 1922. In 1956, it was acquired by CP. The portion of the line north from Gendreau (mileage 47.9) to Laverlochere (mileage 106.5) was ordered abandoned by the Canadian Transport Commission (Order No. R-38909) on January 20, 1986.

LOCATION OF THE LINE

The Temiscaming Subdivision commences at Mattawa (Mile 0.0) and runs northward along the Ottawa River to Temiscaming (Mile 40.5), and then in a northeastern direction to Gendreau (Mile 47.9). A map of the area is attached.

CONDITION OF THE TRACK

Overall, the present condition of the line is good. The rail is 100 pound per yard steel on treated track ties and gravel ballast which are in good condition. The two bridges on the line are also in good condition. A Permanent Slow Order is in effect on curves, as well as between mileages 40.0 and 41.5, where speed must not exceed 20 miles per hour. There are also restrictions governing movements in the vicinity of the Tembec Forest Products Company (hereinafter Tembec) yard, at Mile 40.0 near Temiscaming; movements must be made at restricted speed and not in excess of five miles per hour. The maximum gross weight per carload is 220,000 pounds.

DESCRIPTION OF SERVICE

Service has been provided by a collector-distributor which operates daily (except Sundays) out of North Bay, Ontario, moving up the Temiscaming Subdivision to the Tembec Plant, at mile 40.0 and then along to Gendreau.

The following table summarizes the traffic originating and terminating on the branch line during the years shown.

TRAFFIC SUMMARY

1985 In 1985 Out 1986 In 1986 Out 1987 In 1987 Out - 2 - - - - - - - 98 - 34 - 2 - 98 - 34

ACTUAL LOSSES

Where an application is opposed, the Agency, in accordance with section 163 of the NTA, 1987, issues a statement of actual loss incurred in respect of the subject branch line operation. The determinations for 1985, 1986 and 1987 were based on a preliminary submission and indicate the continuing trend of actual losses incurred in the operation of this line.

The "Actual Losses" as determined by the Agency, pursuant to the provisions of the Railway Costing Regulations, SOR/80-940, and section 157 of the NTA, 1987 for the years 1985 through 1987 are shown in the following table:

Year Total Costs $Revenues$ Actual Loss $Actual Loss Per Carload$
1985 173,367 9,368 163,999 82,000
1986 251,398 106,361 145,037 1,480
1987 189,782 40,804 148,978 4,382

On December 15, 1988, the Agency issued the Notice which set out these actual losses in detail and the factors used in their calculation.

ALTERNATIVE TRANSPORTATION FACILITIES

Alternative CP rail service is available at Temiscaming and at Mattawa. The nearest alternative rail head is at North Bay, 47.9 miles southwest of Temiscaming. There are no CN lines in the immediate area.

Tembec, in Temiscaming, has a private siding which it has made available to other shippers on occasion.

Several trucking companies, located either in this region or in North Bay, are licensed to operate in the area served by this branch line.

SUBMISSIONS

In its application, CP stated that during the three prescribed years no inbound carload traffic was handled on the branch line. The outbound carload traffic consisted of non-recurring shipments of scrap steel which was being moved from Temiscaming to Hamilton, Ontario for reclamation. CP also filed information which indicated that the Town of Temiscaming is not opposed to this application.

Six submissions were received from interested parties in reply to the notice of the application published by CP. These submissions are summarized below.

2. L. Generoux and H. Bailey

These interveners support the application and are interested in buying the station for commercial purposes.

3. Mr. Gilles Legault

This intervener expressed a limited objection. Mr. Legault opposes abandonment of the branch line until a regional railway he plans to establish can acquire it for the purpose of a short line operation within that regional network. That network would be established at some unspecified future date by his yet-to-be-incorporated Quebec-Abitibi and Côte-Nord Central Railway Company.

4. Commonwealth Plywood Company Limited

Mr. W. Caine, President of the Commonwealth Plywood Company Limited (hereinafter CPCL), stated that his company opposes the abandonment application. His position is that CPCL has used and will continue to need the branch line for rail services to his lumber and veneer mill on the CPCL siding at Tee Lake, near mile 46.1 of the branch line. Prior to 1985, the mill generated in the order of 25 carloads of shipments annually, some of which move as far as Oregon. But a labour strike, from October 1985 to December 1986, caused the closure of the Tee Lake mill and curtailed rail shipments. Subsequent to its acquiring the mill at Tee Lake in 1981, it had purchased the rail siding which it believed was in good condition and also with the belief that rail service would be continued. Six months later, CP advised CPCL that important repairs were required to the siding. CPCL began repairs and installed an extension to improve access for freight; however, the strike delayed repairs. In January 1987, operations at Tee Lake started up again but CP advised CPCL against making siding repairs as CP intended to abandon the branch line. CPCL states that it is pointless to spend the money to make the necessary repairs until it is assured that rail service will be restored; thus, the CPCL siding repair was suspended pending the outcome of this application.

As a temporary measure, CP arranged for CPCL to truck its veneer shipments 10 miles to the Tembec siding in Temiscaming, where they were transshipped into boxcars, dropped there for CPCL use. CPCL has continued to use this alternative for veneer shipments to the present date.

The present volume of rail traffic that CPCL has to offer from Tee Lake is estimated at 45 carloads. CPCL estimated that this volume of freight, if handled on the rail siding from its facility at Tee Lake, could represent over thirty percent of the total value of its shipments.

In 1987, CPCL purchased a mill at Belleterre, which it is renovating. Located some 30 miles north of its Tee Lake mill, the Belleterre plant is not yet in operation and has no rail access. According to Mr. Caine, this mill could eventually generate possibly 25 carloads of veneer plywood which could be trucked to Tee Lake for movement by rail.

Since the beginning, Mr. Caine stated that CPCL has lost markets because of the inability to ship by rail on a regular and reliable basis, and CPCL has certain customers which it may lose if deliveries cannot be made via rail. It is CPCL's position that the use of the Tembec arrangement is unacceptable for several reasons: the Tembec loading platform is inadequate for CPCL needs; boxcars consigned to CPCL are not available when the CPCL truck arrives; this arrangement imposes extra costs on CPCL; and there have been delays in shipments which negatively affect CPCL's business. CPCL concludes that it must have rail service into its siding rather than continue to use Tembec's facilities or consider other options. Since CPCL wants to get away from its dependence on Tembec, CPCL submits that this branch line abandonment would have a serious effect on its operations both at Tee Lake and at Belleterre.

If the branch line were abandoned, the obvious alternative for CPCL is to convert totally to a trucking operation and truck its products/shipments from the mills either to the customer or to the nearest alternative rail head for transshipment and furtherance by rail. In reply to CPCL complaints to CP about the Tembec option, CP proposed some new alternatives ranging from CPCL building a new loading ramp near the Tembec site to an intermodal CP service out of North Bay. CPCL filed documents which indicate that it has investigated these options but conclude that transporting by truck would be unsatisfactory. Also, from past experience CPCL is disinclined to incur building costs.

As its last point, it was stated by CPCL that in the event the line were ordered abandoned, it believed that some form of compensation from both the carrier and the Ministry of Transport would be justified.

5. Le ministère des Transports du Québec

Mr. J. Girard, representing le ministère, stated that le ministère supports CPCL in its objection to the application and suggested that perhaps the federal Minister of Transport should enter into an agreement under section 175 of the NTA, 1987 with the local shipper.

6. The Regional Municipality of the County of Temiscaming

The Regional Municipality of the County of Temiscaming, represented by M. D. Bellemarre, also wrote to express support for the position taken by CPCL.

7. The City of Belleterre

Mr. P. Larivière, Mayor of Belleterre, in his submission, stated that the Town supports the CPCL position.

On December 15, 1988, the Agency issued its determination of the amount of the actual losses incurred by CP in the operation of the branch line, and invited additional submissions providing evidence relevant to the possibility that the branch line become economic in the foreseeable future. Only CPCL replied. In addition, to facilitate discussion of transportation options available to CPCL, the Agency's Dispute Resolution Branch held a meeting with CPCL on December 12, 1988. CP was invited to attend, yet it declined the invitation. Following that meeting, CPCL filed further information and CP filed additional commentary in response. This correspondence is summarized below.

8. Commonwealth Plywood Company Limited

Mr. Caine stated, as his best estimate, that the Tee Lake mill will be able to provide 75 carloads of veneer plywood annually. This assumes the repairs will be quickly completed and CP is ordered to continue to operate the branch line in question. Tee Lake also ships lumber and veneer logs by truck. Mr. Caine expressed a willingness to redirect some of this and an unspecified amount of the Belleterre mill veneer shipments to Tee Lake for furtherance via rail rather than via truck from Belleterre, but CP advised him that CP cannot beat the rates that the trucking companies offer CPCL for that business. Lastly, he informed the Agency that CP had advised him that at least 125 carloads were needed to make the branch line viable and further that CP would not quote him a rate for those hypothetical Belleterre shipments.

Mr. Caine also requested a briefing by the Agency on his rights under the NTA, 1987 regarding the obligations of a common carrier and his courses of action if abandonment were approved.

CP stated that it had not refused to provide train service into Tee Lake but only into the CPCL siding since October 17, 1984, due to the condition of the siding tracks. Further, CP filed copies of correspondence between CP Marketing staff and CPCL, which indicates CP could not compete with present trucking rates for the Belleterre and Tee Lake lumber shipments destined for the Toronto or Ste. Therese destinations. CP proposed solutions to the Tembec problem, solutions it had put to CPCL, noted that CPCL markets are predominantly served by truck from Tee Lake, and stated that its records show CPCL's actual rail traffic is only 45 carloads, which is well below the 75 cars forecast.

FINDINGS

Section 164 of the NTA, 1987 requires the Agency to determine if the line is economic or uneconomic, and further whether there is a reasonable probability of the branch line becoming economic in the foreseeable future.

During the latest three years for which operational data are available, CP moved practically no traffic on the branch line and operated the branch line with actual losses of \$153,000 per year on average. Even if CPCL shipments had originated at the siding, the traffic is insufficient to make the branch line viable. On the basis of this evidence, the Agency has determined that the branch line is at present uneconomic.

While CPCL has indicated it could increase its use of rail services, from approximately 45 to 75 carloads per year, this volume is well below the minimum 125 carloads required to make the operation of this branch line economic. Although CPCL expressed a willingness to re-direct future Tee Lake and Belleterre shipments from the trucking mode to the rail mode, the quantity of these additional shipments is uncertain and, as the Belleterre facility is not yet operational, the existence of those shipments is not assured.

As the Agency has received no other evidence that rail traffic would increase, the Agency must conclude there isnota reasonable probability that the branch line could become economic in the foreseeable future.

In compliance with subsection 165(1) of the NTA, 1987, the Agency concludes that the operation of the Temiscaming Subdivision from Temiscaming (mileage 40.5) to Gendreau (mileage 47.9) should be abandoned.

Altough not specifically permitted under subsection 173(3) of the NTA, 1987, the Agency is taking this opportunity to suggest to the Minister that he enter into an agreement under subsection 175(6) with CPCL in order to arrange for the improvement of alternative transportation facilities in the area served by the branch line. Specifically, a contribution towards the improvement of the loading platform either at Tembec or at another suitable location would appear appropriate and would be a cost effective expenditure.

Section 168 of the NTA, 1987 governs the time limits within which the Agency must order the abandonment of the operation of a branch line. In view of the recommendation above, the time CPCL requires to firm up both its needs and its arrangements for alternative transportation as a result of this decision, and also the northern location of the branch line, it is deemed to be in the public interest that some time be permitted before abandonment can take effect.

Accordingly, the Agency determines that CP is authorized to abandon its operation of the Temiscaming Subdivision, for the trackage specified in the application, six months from the date of an order to this effect. An Order will issue accordingly.

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