Decision No. 350-R-1989

July 13, 1989

July 13, 1989

IN THE MATTER OF the application by Canadian Pacific Limited for authority to abandon the operation of the portion of the Kentville Subdivision from Kentville (mileage 4.6) to Annapolis Royal (mileage 58.4) and the entire Yarmouth Subdivision from Annapolis Royal (mileage 0.0) to Yarmouth (mileage 86.6), a total distance of 140.4 miles, in the Province of Nova Scotia.

File Nos. 39309.202
39309.201


Heard in Bridgetown, Nova Scotia on April 5 and April 6, 1989

BEFORE:

Edmund J. O'Brien
Member, National Transportation Agency
James Mutch
Member, National Transportation Agency

Appearances:

M. Hurteau
for the National Transportation Agency
F.C. Hume/
W. McMurray
for Canadian Pacific Limited
W. M. Sutherland
for the Minister of Transportation & Communications, Department of Transportation, Province of Nova Scotia
Honourable G. Moody
for the Department of Transportation & Communications, Province of Nova Scotia
J.B. Prince
for the Municipality and Town of Digby Industrial Commission
G.W. Hines
for Transport 2000-Atlantic
H. Beviss
for the Town of Bridgetown
N. Lasch
for the Municipality of the County of Annapolis
D. Hankinson LeGard
for the Annapolis Valley Affiliated Boards of Trade and the Hants County Community Futures
J. Scales
for Fundy Fertilizers
W. MacAlpine
for the Municipality of the District of Digby
D. Taylor
for the Town of Kentville
J. Pearle
for the Annapolis County Federation of Agriculture
E.H. Shane
for Superior Propane Incorporated
B.M. Levy
for the Nova Scotia Woodlot Owners & Operators Association
A.R. Hartlen
for the Brotherhood of Maintenance of Way Employees
B.A. Malone
Public Interest
G. Marshall
for Atlantic Defence Industries Limited
C. Campbell
Member of Parliament, South West Nova
J. Holm/
D. Fraser
for the Nova Scotia New Democratic Party
S. Archibald
for the Nova Scotia Chamber of Commerce
J. Casey
MLA for Cumberland-Colchester

HISTORY OF APPLICATION

On June 28, 1988, Canadian Pacific Limited (hereinafter CP), applied, pursuant to section 160 of the National Transportation Act, 1987, R.S.C. 1985, c. 28 (3rd Supp.) (hereinafter the NTA, 1987) for authority to abandon the operation of the portion of the Kentville Subdivision from Kentville (mileage 4.6) to Annapolis Royal (mileage 58.4) and the entire Yarmouth Subdivision from Annapolis Royal (mileage 0.0) to Yarmouth (mileage 86.6), a total distance of 140.4 miles in the Province of Nova Scotia.

HISTORY OF THE LINE

The Kentville Subdivision was built by the Windsor and Annapolis Railway Company in 1868. The Windsor and Annapolis Railway Company was absorbed in 1895 by the Dominion Atlantic Railway Company (hereinafter DAR), when DAR was incorporated to acquire three railways. The DAR was leased to CP in 1912 for 999 years.

The Yarmouth Subdivision was built by the Western Counties Railway Company between 1874 and 1879. The name of the Company was changed to the Yarmouth and Annapolis Railway Company in 1893. The Yarmouth and Annapolis Railway Company was acquired by (DAR) in 1895.

LOCATION OF THE LINE

Both the Kentville and Yarmouth Subdivisions follow the Bay of Fundy Coastline in an east/west direction. A map of the area is attached.

CONDITION OF THE TRACK

The Kentville Subdivision consists of 7.5 miles of 100 pound rail and 50.9 miles of 85 pound rail which is in adequate condition for traffic handled. Tie condition is poor to fair. Ballast consists of sandy gravel, and surface and line are in fair condition. Additional ballast is required in some locations. Drainage is poor in some cut areas, and ditching is required. There are 17 bridges, and in general the bridges are in good condition, although normal programmed replacement of timber decks and pile trestles, and associated minor repairs will continue to be necessary.

The Yarmouth Subdivision consists of 3.4 miles of 100 pound rail, 75.3 miles of 85 pound rail and 7.3 miles of 80 pound rail. Their condition is poor. Ballast consists of sandy gravel, and surface and line is fair to poor. Additional ballast is required in some locations. Drainage is poor in some cut areas, and some ditching is required. There are 18 bridges several of which will require replacement or substantial repairs in the near future.

DESCRIPTION OF SERVICE

On the Subdivisions, trains are operated on an as and when required basis. Passenger trains offer daily service over both the Kentville and Yarmouth Subdivisions. Maximum authorized timetable speeds for passenger trains with Rail Diesel Car units (RDC) is 50 miles per hour. Freight train speed is limited to 40 miles per hour.

CARLOAD TRAFFIC

KENTVILLE SUBDIVISION

KENTVILLE (mileage 4.6) TO ANNAPOLIS ROYAL (mileage 58.4)
(in carloads)
  1985 In 1985 Out 1986 In 1986 Out 1987 In 1987 Out
Cambridge 1 - - - - -
Berwick 110 6 115 3 51 -
Aylesford 2 - - - - -
Kingston 478 - 417 - 340 -
Wilmot 39 - 26 - 24 -
Fundy Fertilizers Ltd. 1 - - - - -
Middleton 230 5 170 1 96 -
Bridgetown - 1 - - - -
Annapolis Royal 2 1 4 - 5 -
TOTAL FORWARDED/RECEIVED 863 13 732 4 516 -
OVERALL TOTAL 876 876 736 736 516 516

YARMOUTH SUBDIVISION

ANNAPOLIS ROYAL (mileage 0.0) TO YARMOUTH (mileage 86.6)
(in carloads)
  1985 In 1985 Out 1986 In 1986 Out 1987 In 1987 Out
Digby 26 - 34 - 36 1
Weymouth - 6 1 - 3 -
Church Point 2 - 1 - - -
Saulnierville - 6 1 - 3 -
Meteghan 3 - 4 - 1 -
Yarmouth 35 6 20 21 12 -
TOTAL FORWARDED/RECEIVED 66 18 61 21 55 1
OVERALL TOTAL 84 84 82 82 56 56

ACTUAL LOSSES

Where an application is opposed under section 161 of the NTA, 1987, the National Transportation Agency (hereinafter 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 "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 Losses $
1985 2,449,923 700,397 1,749,526
1986 2,488,770 640,101 1,848,669
1987 2,110,945 499,154 1,611,791

ALTERNATIVE TRANSPORTATION FACILITIES

Highway

Highway 101, a paved undivided highway follows the Bay of Fundy coastline from Kentville to Yarmouth. Highway 103, also a paved undivided highway follows the Atlantic coastline to Halifax.

Rail

The only railway line in the area is CP's DAR Halifax Subdivision connecting Kentville to Halifax.

SUMMARY OF EVIDENCE

Canadian Pacific Limited

In addition to the evidence submitted by way of its application, CP introduced further evidence that the line was uneconomic and that there was no reasonable probability of its becoming economic in the foreseeable future.

In order to maintain the line in service for the next five to ten years at present traffic volumes, CP indicated that expenditures of approximately $4.6 million would be required over and above normal day to day maintenance. A major portion of this expense ($2.7 million) would be necessary to keep three bridges in safe operating condition or $20.0 million for replacement.

CP also submitted claimed costs, revenues, and loss figures for 1988 which revealed that CP had incurred an actual loss of $1.5 million. From this evidence, CP stated that the line continued to incur losses from 1985 to 1988 of approximately $6.5 million.

Based on 1988 claimed costs and revenues, CP estimated that in order to meet the losses sustained in operating the line, an additional 4,372 carloads would have to be handled at current rate levels or alternatively based on current traffic volumes, rates would have to increase by a factor of 424%, in order to generate sufficient revenues to defray actual operating costs. Following many discussions with potential and actual shippers, municipalities, towns and villages, CP indicated that there was no possible source of expanded future rail traffic. At best, CP would continue to handle present volumes. Furthermore, CP's analysis in conjunction with a 1984 Nova Scotia Department of Transportation trucking study concluded that if the operation of the line were ordered abandoned, the impact on the highway capacity in the area would range from less than one truck per weekday up to four trucks per weekday.

ISSUES

From the evidence presented prior to and during the public hearing, it was evident that many parties were concerned about the Agency's jurisdiction to consider CP's application and the impact of the 4% limit on allowable abandonments. Further concerns were raised on levels of service, on marketing and rates, on the effect of abandonment on the provincial highways, on transportation costs, on maintenance, and on VIA Rail.

Jurisdiction

Several interveners including the Department of Transportation for the Province of Nova Scotia, representatives of the Municipality of the County of Annapolis and of Transport 2000, Atlantic Region, argued in their submission that the line applied for abandonment by CP was in fact owned by a separate company called the Dominion Atlantic Railway (DAR), a subsidiary of CP. Transport 2000 stated that the DAR is a federally chartered company which is registered in Nova Scotia and whose directors are separate from those of CP. This intervener submitted that the DAR is the owner of the Dominion Atlantic Railway Line between Windsor and Yarmouth and had entered into a 999-year agreement with CP to lease the line. According to this intervener, the DAR continues to operate as a separate entity from CP in that it executes documents, leases rights-of-way and continues to own the lands, rights-of-way and tracks of the DAR line. The Department of Transportation for the Province of Nova Scotia submitted further to the above arguments that there is clear evidence that the DAR is the owner of the rail right-of-way and rail service subject to the provisions of any of these agreements or other agreements with CP.

The Government of Nova Scotia was of the view that the DAR is the proper applicant because it, and not CP, is the owner of the line in question. They suggested that, as the alternative, both the DAR and CP should have made a joint application for the abandonment of the line.

Interveners relied on subsection 159(4) of the NTA, 1987 whereby no railway company shall abandon more than 4% of its total route mileage in any of the first five years after the coming into force of that section. Therefore, since the DAR is a railway company and, is the owner of the line under application for abandonment, it is as such, subject to the 4% restriction rule. Should abandonment be allowed, the DAR would in fact be abandoning 75% to 80% of its total route mileage which is contrary to subsection 159(4) of the NTA, 1987.

CP expressed the following comments. CP confirmed that the DAR is a company which was incorporated by the Statutes of Canada and that it is a railway company. It is also a company authorized by the Canadian Parliament to lease all its franchises, powers, privileges and railway undertakings to CP. CP acknowledged that the DAR and the Canadian Pacific Railway Company (now Canadian Pacific Limited) entered into a lease agreement in 1912 for a period of 999 years. The lease gives to CP all of the franchises and powers of the DAR. The line has been operated by CP as part of the CP system. Therefore, submitted CP, since 1912 the company which is called the Dominion Atlantic Railway Company has not had authority to operate the line and as such, the DAR could not by law make the application for abandonment.

CP argued that the application was made by the proper authority. CP also argued that subsection 160(4) of the NTA, 1987 refers to the abandonment of the operation of a branch line and not of the abandonment of lines. They further submitted that the party who has authority to apply for the abandonment of operations over the line is the party who operates the line. In this case, CP is the party which operates the line. Therefore, there is no violation of subsection 159(4) of the NTA, 1987.

Finally, during the hearing, some interveners submitted that the application should deal not only with the portion Yarmouth to Kentville but with the portion Yarmouth to Windsor Junction as well. These interveners are of the view that the Agency should review the entire branch line, that is the branch line from Yarmouth to Windsor Junction, and not just the portion of the line which runs from Yarmouth to Kentville, to determine whether or not the branch line is economic pursuant to section 164 of the NTA, 1987.

Levels of Service

The Province of Nova Scotia stated that customers such as Dominion Textiles would ship out their finished products by rail if they received the necessary levels of service. It was also the Province's opinion that the level of service provided by CP was suspect, and this lack of provision of satisfactory service led to abandonment of rail by the shippers. The Province contended that CP by its actions caused shippers to forsake rail service and that now CP with this application is seeking formal approval for abandonment. The Province was also concerned that lack of rail service in the future would be detrimental in attracting new businesses to this region of the Province.

Concerns over service levels were also raised by various Towns, Boards, and Municipalities. In general, their evidence was that customers withdrew from using rail because CP was not willing to invest in providing efficient service. If service was improved, it was expressed that 16 companies would ship on the railway. This figure was identified in a consulting report prepared for the Province of Nova Scotia by Stevenson Kellogg Ernst and Whinney. These interveners were of the opinion that by reducing service and increasing prices, the railway had been moving in a downward spiral.

After consulting with businesses in the area, it was the position of Transport 2000 that two main reasons encountered for not using rail was poor service and high rates. One example referencing poor service was the frequency in which CP picked up full cars, ranging from the next day to two or three weeks. Problems were also experienced with the availability of empty cars for shippers.

Effect of Abandonment on Highways

The effect of the abandonment of rail on the highway infrastructure was seen as a major concern of the Province of Nova Scotia. Besides adding more and heavier loads on the highway system which would accelerate damage to the highway, greater quantities of hazardous material would be travelling the road network with greater frequency thus increasing the risk to safety of the travelling public.

It was the position of the various towns, boards, and municipalities that abandonment would result in increased truck traffic on already clogged and congested roads. Furthermore, only one highway was available for major bulk transport, this being the relatively new Highway 101, which was already developing problems associated with bulk carrier use. Furthermore, Highway 101 was not yet fully completed and there were no passing lanes from Coldbrook to Bridgetown. In addition, highly volatile propane gas and aviation fuel would have to be transported on single lane highways in the event of abandonment and this was viewed as being unsafe.

The New Democratic Party of Nova Scotia stated that far more dollars were spent on the provincial road network than rails and unlike the rail system, roads in the province were heavily subsidized and this should be redressed. It also testified that by accepting federal money for construction of highways, the province was becoming a silent partner in aiding abandonment.

The Brotherhood of Maintenance of Way Employees felt that trucks were not a suitable alternative since it was estimated that they used 8.7 times more energy and produced nine times more pollution than to move a given quantity of freight by rail.

Transportation Costs

In the event of abandonment of operations on the line, the Province's position was that some businesses would close while other companies would incur capital costs in adjusting to a different transportation mode. These costs would be passed onto the consumers ultimately thus increasing the cost of living in the area.

The various towns, boards, and municipalities claimed that abandonment would require businesses to build costly loading facilities and purchase trucks which would lead to increased operating costs.

Transport 2000's solution to reducing costs of operating the service was to regard the DAR as an autonomous operation thereby eliminating the need to cost the service through a large system formula which may not accurately reflect the actual costs of operating the line and included overhead costs attributed to system headquarters. Two options were offered for consideration, the first being the previously mentioned autonomous operation, and the second being the sale of the DAR to another operator. With respect to operating the line by a short-line operator, Transport 2000 estimated that there were 177 potential rail users between Coldbrook and Yarmouth which could possibly generate 4,200 carloads.

The only company to give direct testimony was Fundy Fertilizers. This shipper indicated that ammonium nitrate received at their facilities would have to be partially railed and partially trucked to the destination if the operation of the line were ordered abandoned. This additional process would cause increased handling and shrinkage costs of approximately $9.50 a metric tonne as well as product degradation which would put them at a competitive disadvantage with the other fertilizer producers.

Marketing and Rates

The point raised with respect to this issue on behalf of the Towns, Boards, and Municipalities was that the Dominion Atlantic Railway was not in the long range plans of CP and that marketing of the line had been discouraged in favour of CP intermodal or piggy-back operations. Delays or failures in providing quoted rates also created problems for the users. If marketing was more aggressive, it was their position that renewed interest in rail service could possibly occur.

The Nova Scotia New Democratic Party testified that CP had not vigorously promoted the line as an alternative for shippers and strengthened this point by adding that by expanding their intermodal facilities in New Brunswick, CP had a vested interest in attracting freight to trucks rather than rail.

Fundy Fertilizers testified that without rail service and rail rates, an unacceptable increase in truck rates would occur. It also stated that one of the major ingredients used in their operation is classified as a dangerous good under the federal Transportation of Dangerous Goods Act, R.S.C. 1985, c. T-19, and as such, its movement by highway was regulated and by water was restricted. Fundy Fertilizers expected that the ingredient ammonium nitrate would have to originate from outside the Maritime region and be railed as far as possible before being transferred to trucks for delivery to its plant.

Maintenance

Transport 2000's evidence was that track and roadway maintenance figures could be deemed to be inflated. This reasoning was based on the judgment of a former CP employee who had indicated that little or no maintenance had been performed on the major bridges along the line in the last ten years approximately. As a result, deterioration had occurred which resulted in substantial sums being required for rehabilitation presently. A similar analogy was drawn towards general track maintenance as well.

VIA Rail

Many of the interveners submitted that the operation of the line should be retained to provide VIA Rail passenger service as many riders have no alternative transportation mode. Many deemed this passenger service essential and cited as an example a recent bus strike in the province which would have left riders with no other means of transportation if the operation of the line had been ordered abandoned.

Matters Considered

Under the NTA, 1987, the Agency is required to first determine whether this branch line is uneconomic and if there is no reasonable probability of its becoming economic in the foreseeable future, the Agency must order that the operation of the branch line be abandoned. The Agency must also order the abandonment of the operation of the line if it determines that it is uneconomic with a reasonable probability of becoming economic in the foreseeable future, unless it determines that the line is required in the public interest.

For the prescribed financial years of 1985 to 1987, the Agency determined that actual losses were as follows:

Year Actual Loss $
1985 1,749,526
1986 1,848,669
1987 1,611,791

This determination was made pursuant to section 163 of the NTA, 1987, and was issued with the March 7, 1989 Notice of Public Hearing.

CP testified that their 1988 preliminary claimed actual loss in operating the branch line was approximately $1.5 million. Even by excluding this amount as it was not verified, the branch line incurred average annual actual losses of approximately $1.7 million. Therefore, the Agency has determined on the basis of the evidence before it that the branch line was uneconomic.

Having determined the status of the branch line, the Agency must make a determination as to whether there is a reasonable probability of the branch line becoming economic in the foreseeable future.

For the prescribed financial years, carload traffic had declined on the branch line from a high of 960 carloads in 1985 to a low of 572 carloads in 1987. CP stated that 1988 levels had further declined to 272 carloads, and 47 carloads for the first three months of 1989. The Agency heard evidence from CP that in order to eliminate the losses on the line, an additional 4,372 carloads would have to be generated on the line over the 272 carloads handled based on 1988 traffic, cost, and revenue information. This estimate only eradicated the losses in operating the line. Additional carloads over and above the 4,372 level would have to be handled to pay for the fixed costs in operating the line. CP also told the Agency that instead of requiring substantial additional traffic, losses could be eliminated by a rate increase of 424 percent.

Based on the evidence brought before the Agency with respect to the operation of the branch line between Kentville and Yarmouth, it is evident that such carload levels could not be realized. Similarly, an increase in potential rates to the magnitude specified by CP would eliminate present traffic as it exists. Only one shipper gave direct testimony with respect to the proposed abandonment. From 1985 to 1987, this shipper has received on average 32 carloads annually. Unfortunately such carload levels are not sufficient to increase revenues which could make the line economic.

The Agency did however, receive evidence that there was a potential for 177 rail users generating 4,200 carloads. The Agency cannot consider this to be an accurate customer and traffic projection. The number of potential rail users were identified by a quick reference through the area telephone book while the carload figures were derived by driving through the area observing businesses in operation and being aware of general business practices. Furthermore, even if the Agency were to consider these estimates as potential traffic, they were determined to be based on a short line operation. A report commissioned by the Province of Nova Scotia by the firm Stevenson Kellogg Ernst and Whinney (SKEW) and R.L. Banks & Associates, Inc. (RLBA) to study the feasibility of operating the DAR as a private sector short line railway concluded that the costs of operating the portion of the line subject to this abandonment application would be almost four times the freight revenues expected to be generated. Although one portion of the line not subject to this application could be economical, the SKEW Report also concluded that operating the entire DAR as a short line operation would still place the line in a loss position exceeding $700,000 annually.

Other potential traffic sources would be the five industrial parks situated in various communities located along the line. However, the evidence in this regard indicated that costly and somewhat lengthy connections to the existing trackage would be required or that the present customers were being served by truck.

Accordingly, the Agency finds that the operation of the branch line is uneconomic and that there is no reasonable probability of the branch line becoming economic in the foreseeable future.

With respect to the Agency's jurisdiction to consider this application, the Agency is of the view that the abandonment provisions of the NTA, 1987 are not affected by the long-term lease of the line between the DAR and CP. Subsection 160(4) of the NTA, 1987 specifically states that an application for abandonment is for the abandonment of the operation of a branch line and not for the abandonment of a line. Therefore, the Agency finds that CP is the appropriate party to exercise the legal right to apply for the abandonment of the operation of the Kentville to Annapolis Royal line and the Annapolis Royal to Yarmouth line.

Further, with respect to the maximum amount of line which may be abandoned pursuant to subsection 159(4) of the NTA, 1987, in this instance the 4% mileage route ceiling applies to the total lines over which CP operates in a given year. Thus, CP's application is not in contravention of the 4% mileage rule of subsection 159(4) of the NTA, 1987.

On the issue of whether or not CP should be allowed to apply for abandonment of a portion of the line between Kentville and Yarmouth as opposed to Windsor Junction to Yarmouth, subsection 157(1) of the NTA, 1987 is quite clear in the fact that a railway company may apply to abandon a branch line. Subsection 157(1) defines "branch line" as:

"a line of railway in Canada of a railway company within the legislative authority of Parliament that, relative to a main line within the company's railway system in Canada of which it forms a part, is a subsidiary, secondary, local or feeder line of railway, and includes a segment of any such subsidiary, secondary, local or feeder line of railway."

CP has the legislative authority to apply for any segment of a branch line and in this instance, they have chosen to apply for abandonment of the operation of a portion of the Kentville Subdivision and the entire Yarmouth Subdivision.

With respect to the issue of service, the Agency heard evidence that generally if service were improved, usage would increase and that customers withdrew from using rail because of poor service. The Agency has found that present "as and when required" service has generated minimal traffic thus losses have continued to be incurred. With this type of service, CP is required to handle traffic when the customer requests service. This provision is found under section 144 of the NTA, 1987. If sufficient volumes had been offered, CP would have had to adjust their service levels accordingly. As the Agency received no complaints regarding levels of service prior to CP's filing of its application for abandonment, it is the Agency's finding that the customers have chosen not to use rail as their mode of transporting goods. In fact, CFB Greenwood, once a major rail user, indicated that rail service would be beneficial but not necessarily essential.

Sufficient evidence was also given as to the effect of abandonment on the provincial highway system. Utilizing statistics from a 1984 trucking study prepared by the Department of Transportation for the Province of Nova Scotia, and adding on 1985 railcar levels translated into truck volumes which were the highest of the three prescribed accounting years, the amount of additional trucks which would use the highway system west of Bridgetown would be approximately one truck or less per weekday on the roads. Furthermore, the impact of abandonment on the stretch of highway between Bridgetown and Digby which normally has heavier traffic on account of the Digby ferry would be a maximum of four additional trucks per weekday assuming fifty percent of the Digby ferry traffic was routed over this part of the highway network. It is therefore the view of the Agency that this additional volume of traffic would not have a major effect on the highway system. In addition, the Agency recognized that concerns were raised over the transportation of dangerous or hazardous materials by road, mainly aviation fuel and propane. Ninety percent of aviation fuel destined to CFB Greenwood is handled by truck presently, while the number of carloads of propane handled between 1985 and 1988 averaged 31 carloads annually. Therefore, the Agency has concluded that abandonment would not greatly affect the existing traffic patterns being experienced on the road network or increase the transportation of dangerous goods significantly.

Inasmuch as the Agency heard witnesses' views with respect to additional transportation costs which would be imposed on businesses should abandonment be authorized, it should be noted that provisions such as subsection 175(6) of the NTA, 1987 allow for the Minister of Transport to enter into an agreement with the government of a province or municipality or with any persons who are or were regular shippers by rail on the date or two years prior to the date of abandonment for payment of contributions to assist in the transition to improved transportation facilities. This provision may be invoked if it has been demonstrated to the Minister that one or more shippers would suffer significant economic harm as a result of the abandonment of operations on the line. However, the Agency cannot make such recommendations to the Minister of Transport. If there are individuals who are of the view that they will suffer economic harm upon abandonment of operations on the line, those affected should petition the Minister of Transport themselves pursuant to the provisions of subsection 175(6) of the NTA, 1987.

It was quite clear that many interveners were upset over CP's marketing of the service and potential increases in truck rates should abandonment of operations be authorized. With respect to service, it was even suggested that the Agency should consider the concept of good faith and the fact that CP advertently or inadvertently, was lacking in such faith with respect to marketing. The Agency has not found this to be the case. The SKEW Report indicated that traffic was declining and the potential for new traffic was limited. The interest in using rail had declined. The Annapolis Valley Affiliated Boards of Trade conducted a study which had a dismal return rate. It is clear that the shippers have chosen alternative modes of transporting their commodities. CP has spent considerable amounts of money as evidenced by the statement of actual loss in operating this line, however, the revenues have not been sufficient to meet such costs. If they were actively seeking to demarket the area and provide poor service, its unlikely in our opinion that CP would have spent on average $2.3 million annually.

With respect to the potential increase in truck rates, the evidence indicated that the Province of Nova Scotia has issued approximately 1,600 motor carrier licences of which some 840 were provincial and 796 extra-provincial licenses. This information was contained in the 1988 Atlantic Provinces Transportation Directory. It seems clear that sufficient truckers are licensed to serve the area which should encourage competition amongst them to ensure truck rates remain competitive.

The issue of track and roadway maintenance was also addressed at the hearing. For the period of 1985 to 1987, track and roadway maintenance expenditures have averaged approximately $725,000 annually or $5,164 per mile. The Agency is of the view that these amounts are not exorbitant given the fact that the line is maintained to handle freight at speeds of up to 40 miles per hour and there are three large multi-span bridges which are examined quarterly and maintenance is scheduled subsequent to the inspection.

Finally, several interveners opposed CP's application because of the existence of passenger rail operations on the line. This application is limited to a request for authorization to abandon only operations along the branch line in question. It should be emphasized that VIA Rail alone, not CP, has responsibility for passenger rail services. Further, the Railway Act, R.S.C. 1985, c. R-3, and the NTA, 1987 contain provisions which control the consideration of applications for the abandonment of passenger rail services. Should VIA wish to alter its frequency or route of service, it is required to make an application to the Agency. This would be dealt with, when required, through an Agency process separate from the one in progress here.

FINDINGS

Having considered all matters, the Agency has determined that the branch line is uneconomic and there is no reasonable probability of it becoming economic. No submissions of opposition were received which could demonstrate that the subject lines would be economic in the foreseeable future.

Accordingly, in compliance with subsection 165(1) of the NTA, 1987, the Agency must conclude that the operation of the Kentville Subdivision from Kentville (mileage 4.6) to Annapolis Royal (mileage 58.4) and the entire Yarmouth Subdivision from Annapolis Royal (mileage 0.0) to Yarmouth (mileage 86.6), must be abandoned.

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. Paragraph 168(1)(a) applies in cases where a passenger service also exists on the branch line. It states as follows:

"(1) Where the Agency makes an order under section 162, 165, 166 or 175 for the abandonment of the operation of a branch line or segment thereof, it shall fix

(a) the date that is one year after the date of the order as the date for abandonment, where VIA Rail Canada Inc. operates a passenger service on the branch line or segment or the branch line or segment is identified in a plan of VIA Rail Canada Inc., approved by the Governor in Council, for the proposed development or expansion of its passenger service as being required for the implementation of the plan."

The Agency determines that it would be in the public interest for the line to be abandoned one (1) year from the date of issue of an Order to this effect. An Order will issue accordingly.

Date modified: