Decision No. 843-R-1994

December 22, 1994

December 22, 1994

APPLICATION by the Canadian National Railway Company, 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 Blaine Lake Subdivision from Paddockwood Junction (mileage 0.7) to a point east of Shellbrook (mileage 27.4), a total distance of 26.7 miles, in the province of Saskatchewan.

File No. T 6115/341


INTRODUCTION

On June 27, 1994, the Canadian National Railway Company (hereinafter CN) applied to the National Transportation Agency (hereinafter the Agency), pursuant to section 160 of the National Transportation Act, 1987 (hereinafter the NTA, 1987), for authority to abandon the operation of the segment of the Blaine Lake Subdivision from Paddockwood Junction (mileage 0.7) to a point east of Shellbrook (mileage 27.4) (hereinafter the branch line).

A map of the area is attached as Appendix A.

LEGISLATIVE REQUIREMENTS

In accordance with section 161 of the NTA, 1987, any person may oppose an application for the abandonment of the operation of a branch line by filing with the Agency, not more than sixty (60) days after the date of the notice of application, a written statement setting forth the grounds on which that person opposes the application. If no opposition is received, the Agency must order the abandonment of the operation of the branch line.

Eight interventions were filed in opposition to this application.

Where an application is opposed, the Agency is required to determine whether the branch line is economic or uneconomic and, if uneconomic, whether there is a reasonable probability of its becoming economic in the foreseeable future. Should the Agency find that the branch line is uneconomic and that there is no reasonable probability of its becoming economic in the foreseeable future, subsection 165(1) of the NTA, 1987 requires the Agency to order its abandonment.

If the Agency determines that a branch line is economic or that, where it is uneconomic, there is a reasonable probability of its becoming economic in the foreseeable future, the Agency still must order the abandonment of the operation of the branch line, unless it determines that the branch line is required in the public interest, as set out in section 166 of the NTA, 1987 and as further defined in section 167 of the NTA, 1987.

Pursuant to P.C. Order 1990-1388 dated June 29, 1990, the segment of the Blaine Lake Subdivision from mileage 0.7 (at or near Prince Albert) to mileage 27.7 (at or near Shellbrook) was removed from the basic railway network, effective July 1, 1990.

By Agency Decision No. 111-R-1994 dated March 15, 1994, only the segment of the Blaine Lake Subdivision between mileage 27.4 and mileage 116.5 (Denholm) was designated as a grain dependent branch line for the 1994-1995 crop year, in accordance with the provisions of section 41 of the Western Grain Transportation Act, R.S.C., 1985, c. W-8 (hereinafter the WGTA). Accordingly, the segment of the Blaine Lake Subdivision from mileage 0.7 to mileage 27.4 is not designated at this time as a grain dependent branch line.

DESCRIPTION OF TRAIN SERVICE

According to CN, there have been no train service requirements on the segment of the branch line between mileage 0.7 and mileage 19.5 since February 1992.

The segment of the branch line between mileage 19.5 and mileage 27.4 was used to serve the elevator of the Saskatchewan Wheat Pool (hereinafter SWP) located at Holbein (mileage 20.5). Train service was provided by CN on an as required basis by Prince Albert train crews on an outpost assignment from Shellbrook. By letter dated November 12, 1993, the Canadian Wheat Board advised CN that the SWP elevator at Holbein had closed. CN continued to serve Holbein until May 1994 in order to empty the grain stored in the elevator.

REROUTING OF TRAFFIC

Prior to 1992, CN served the branch line and the Big River and Meadow Lake Subdivisions from Prince Albert. However, in February 1992 CN ceased operations on the line segment between Prince Albert, mileage 0.7 and mileage 19.5, a point near Holbein. Traffic which had previously used the branch line was rerouted via North Battleford, connecting with trains operating over the CN Prairie North Line. CN further submitted that train service is operated three times per week from North Battleford to Meadow Lake via the Blaine Lake, Big River and Meadow Lake Subdivisions and, generally, six times per week between Saskatoon and Prince Albert.

CN stated that its decision to establish the above service was based on several key factors, such as the limited loading capacity of the branch line; the insignificant impact of the abandonment; the geographical patterns of present and future traffic; the construction by SWP of a high through-put elevator at White Star on the CN Paddockwood Subdivision; and the track loading capacity of the alternate routes of CN.

CARLOAD FREIGHT TRAFFIC

During the prescribed financial years of 1991, 1992 and 1993, the station at Holbein (mileage 20.5) generated all originating carload traffic, which consisted of grain movements only. No carload freight traffic terminated on the branch line during this period. Bridge traffic ceased transiting the branch line during 1992 due to the rerouting of traffic.

The following is a breakdown of the carload freight and bridge traffic handled on the branch line during the prescribed financial years.

CARLOAD TRAFFIC ORIGINATING AT HOLBEIN BRIDGE TRAFFIC
Year Eastbound Westbound Total Total
1991 99 (14%) 598 (86%) 697 811
1992 40 ( 8%) 468 (92%) 508 74
1993 23 (11%) 190 (89%) 213 .

REHABILITATION AND MAINTENANCE COSTS

CN estimated the total cost to increase the load limit carrying capacity of the branch line from 177,000 pounds to 263,000 pounds by way of a rail relay at $2,923,410, based on the availability of partly worn 100-pound rail and track fastenings.

The estimated cost to restore the segment of the branch line from mileage 0.7 to mileage 19.5 to a safe condition for the carriage of traffic is $32,000. Total costs to maintain the branch line in operation is estimated to be $59,000 per year, over the next three years.

ACTUAL LOSS DETERMINATION

In accordance with section 163 of the NTA, 1987, on October 3, 1994, the Agency issued a notice of its interim determination of the amounts of actual loss incurred by CN in the operation of the branch line in each of the prescribed financial years and solicited submissions from anyone with an interest in the matter. Two submissions were received in response to the notice.

Neither intervention provided evidence to suggest that modifications to the interim actual loss determination of the Agency were warranted. However, disallowances were made by the Agency in off-line caboose costs.

After a review of all submissions filed by the parties, pursuant to the provisions of the Railway Costing Regulations, SOR/80-310, and section 157 of the NTA, 1987, the Agency made the following final determination of the amounts of actual loss incurred by CN in the operation of the branch line:

YEAR COSTS $ REVENUES $ ACTUAL LOSS $
1991 1,727,944 1,278,717 449,227
1992 1,167,904 947,292 220,612
1993 559,526 387,990 171,536

A breakdown, by major cost category, of the principal factors applied in determining the amounts of actual loss pursuant to the Railway Costing Regulations and section 163 of the NTA, 1987 is attached as Appendix B.

EVIDENCE PRESENTED

The interveners opposed the proposed abandonment of the branch line on public interest and economic grounds. Four of them requested that a public hearing be convened to consider the application. In addition, the following issues were raised.

Potential woodchip traffic

One of the interveners alleged that CN had intentionally provided poor service to rail customers in order to justify the abandonment and that, had CN been willing to provide adequate service to Weyerhaeuser, there was no reason why CN could not have had the chip haul from Big River to Prince Albert.

In reply, CN submitted that the "loading facilities at the Weyerhaeuser Bodmin site [which is located on the CN Big River Subdivision] are associated with trucks as is the truck dumping facility at the Prince Albert pulp mill." CN contended that the "respective plants at origin and destination designed facilities to accommodate the loading/unloading transportation mode of their choice predicated on plant design criteria, costs of acquisition and installation, as well as transportation and product handling costs."

Port of Churchill

Insofar as the Port of Churchill is concerned, some of the interveners were of the opinion that the branch line is a shorter link from Meadow Lake, Big River and Prince Albert to the Hudson Bay route and the Churchill Seaway. They considered the branch line to be the most direct and cheapest route for moving grain from producers in northern Saskatchewan eastward to the Port of Churchill, Manitoba. In their view, abandonment of the branch line would also result in higher producer trucking costs to transport commodities to alternative delivery points and would contribute to a further erosion of Churchill movements. Conversely, if the branch line were retained, they indicated that it would provide access to CN delivery points in northwestern and north central Saskatchewan within the Churchill catchment area.

CN responded that the Churchill traffic routing "must be examined in context of the grain dependent feeder branch lines and related to the main rail traffic corridors where the train marshalling is conducted." According to CN, Canora, Saskatchewan is the primary location for the marshalling of trains for movement to Churchill. Canora is located on the CN Prairie North Line and is accessible from the south via the Yorkton Subdivision, which connects with the CN Main line at Melville, Saskatchewan. CN contended that train crew considerations and frequency of train movements over main traffic corridors, as opposed to routing traffic via the grain feeder line network, can mitigate routing considerations.

Further, CN maintained that there is nothing in the current WGTA that would automatically translate the abandonment of a line segment into increased mileage related rates for stations on other CN lines. CN submitted that "it is CN's policy not to increase mileage related rates for stations where abandonment of an intermediate connector line would suggest an increase in the short line mileage to a port."

Feasibility of upgrading the branch line

The interveners stated that CN had once considered the branch line so important that CN officials selected it for upgrading under the Branch Line Rehabilitation Program. The interveners submitted that the branch line was in fact upgraded, except for the laying of heavier steel as the program was cancelled before the remaining work could be completed. One of the interveners advocated replacing the existing 60-pound rail between Shellbrook and Prince Albert with heavier rail removed from other locations, since it would be more cost-effective.

CN indicated that the upgrading of the branch line was not economically justifiable since there was no originating or terminating traffic on the branch line following elevator closures and that such a major expenditure was not warranted to accommodate the traffic which currently moves over a rehabilitated alternate route. CN submitted that 90 percent of the rail network extending southwest and northwest of Shellbrook, comprising the Big River and Meadow Lake Subdivisions and the segment of the Blaine Lake Subdivision between mileage 27.4 and mileage 116.5 (Denholm) has a track loading capacity that exceeds the 177,000-pound loading capacity of the branch line.

According to CN, other key factors favouring the rerouting of traffic as opposed to the cost of upgrading the branch line include the following: most carload traffic is presently and, for the foreseeable future, destined westbound; abandonment of the branch line would not have a significant effect on employment or localities; and grain elevator consolidation has taken place with the construction by SWP of a high through-put elevator at White Star on the CN Paddockwood Subdivision. Since the demand for train service changed from Holbein to White Star, it was necessary for CN to upgrade its Paddockwood Subdivision from a track loading capacity of 177,000 pounds to 263,000 pounds, which CN completed in 1993.

Short-line operation

Rather than abandoning the branch line, the interveners maintained that the branch line could be economic if operated as a short-line rail system serving the Prince Albert-Meadow Lake region. Its viability would be contingent upon the willingness of CN to divest itself of the branch line and the Big River and Meadow Lake Subdivisions through a sale to a short-line operator. The interveners submitted that alternative services could be provided by a short-line carrier on the lines in question at one-half to one-third of the cost of the conventional rail service provided by CN.

CN did not specifically address the above proposal in its response.

DETERMINATIONS

Regarding the holding of a public hearing, the Agency has determined that a public hearing is not required and that a decision can be rendered based on the information and submissions on file.

Whether branch line is economic or uneconomic

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

The Agency has determined that CN incurred actual losses of $449,227 on 697 carloads in 1991, $220,612 on 508 carloads in 1992 and $171,536 on 213 carloads in 1993.

After consideration of the amounts of actual loss, the comments of the interveners, the past and present operating practices of CN and the absence of any traffic originating or terminating on the branch line, the Agency concludes that the branch line is presently uneconomic.

Probability of the branch line becoming economic

The Agency has considered the evidence filed by the interveners and CN and the final determination of the amounts of actual loss. The Agency notes that both originating and bridge traffic have decreased from 1991 to 1993. Although the losses incurred by CN decreased from $449,227 in 1991 to $171,536 in 1993, the losses are still substantial.

The Agency must therefore determine whether sufficient freight traffic will materialize in the foreseeable future to generate enough revenue to offset the costs attributable to the operation of the branch line and make the branch line economic in the foreseeable future.

With respect to on-line traffic, the Agency notes that none of the interveners presented any concrete evidence to indicate that carload traffic will originate or terminate on the branch line in the foreseeable future. With the closure of the SWP elevator at Holbein and the construction of a high through-put elevator at White Star, the chances of any grain traffic originating or terminating on the branch line in the foreseeable future appear to be negligible.

The Agency has taken into consideration the contention of the interveners that it is more cost-effective to route shipments destined to Churchill directly over the branch line, as well as the reasons cited by CN for moving the traffic over the main traffic corridors as opposed to routing it via the grain feeder line network. In light of the benefits purported by CN to be derived by rail users and CN, from an operational and service standpoint, and the stated policy of CN not to increase mileage related rates for stations where abandonment of an intermediate connector line would imply an increase in the short line mileage to a port, the Agency determines that the interveners have not provided sufficient evidence or justification to support their position.

With respect to bridge traffic, the Agency is of the view that it is improbable that any bridge traffic will be routed over the branch line in the foreseeable future due primarily to the limited loading capacity of the branch line and the large expenditure required to upgrade the branch line in order to accommodate heavier cars and locomotives. Further, as most carload traffic is currently destined westbound, and according to CN, will continue to be in the foreseeable future, the Agency is of the opinion that the volume of bridge traffic would not be substantial.

Notwithstanding the above, even if grain, woodchip or other traffic were to be routed directly over the branch line, this potential bridge traffic would have virtually no impact on the economic viability of the branch line because, for the purpose of calculating actual loss, paragraphs 157(2)(a) and (b) of the NTA, 1987 refer only to the difference between the costs and revenues attributable to the movement of traffic which originates or terminates on a branch line. Bridge traffic revenues are therefore excluded from the Agency determination of actual loss.

Further, an adjustment is made to exclude the costs attributable to the movement of bridge traffic over a branch line. An adjustment of this nature would not be of the magnitude to offset the combined cost of restoring the eastern portion of the branch line to a safe operating condition, maintaining the subject branch line in operation and/or the estimated $2,923,410 required to rehabilitate the branch line in order to accommodate the carriage of heavier cars and locomotives transiting the branch line. Therefore, the Agency finds that the operation of the branch line would continue to be uneconomic in the foreseeable future.

Respecting the economics of the branch line, one of the interveners conceded that "It is evident that without any grain traffic originating on the rail line, and no interest on the part of CN in using the line for through traffic, it cannot be shown to be economic now or in the future when operated by CN."

The economic determination that the Agency is required to make under the abandonment provisions of the NTA, 1987 relates solely to the operation of a branch line by the applicant, in this case CN. Regarding the feasibility of the branch line being operated more economically by a railway company other than CN, section 174 of the NTA, 1987 provides for the purchase of a branch line or a segment thereof for a price, that is not less than its net salvage value, by any other railway company that is authorized to operate it. To date, no offer to purchase the branch line has been filed with the Agency.

Furthermore, in the event that the operation of the branch line were ordered abandoned, the Agency would cease to have jurisdiction over the use, maintenance and disposition of the railway right-of-way and track infrastructure. However, abandonment of the operation of the branch line by CN would not preclude a prospective purchaser from independently negotiating the acquisition of the branch line with CN at terms mutually acceptable to both parties.

Lastly, regarding the allegation made by one of the interveners that CN provided inadequate service to shippers on the branch line, a review of the records of the Agency reveals that no complaints have been filed with the Agency, pursuant to section 147 of the NTA, 1987, alleging that CN has failed to fulfil its common carrier obligations in respect of this branch line. With respect to the comments of the intervener concerning woodchip shipments originating from the facility at Weyerhaeuser, based on the evidence filed, the Agency concludes that the company's choice of the truck mode was based on several factors not related to the adequacy of the service provided by CN.

In view of the foregoing, the Agency finds that there is no reasonable probability of the branch line becoming economic in the foreseeable future.

ENVIRONMENTAL ASSESSMENT

The Agency is subject to the Environmental Assessment and Review Process Guidelines Order, SOR/84-467 (hereinafter the EARP Guidelines Order). 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 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.

CONCLUSION

Accordingly, after consideration of the evidence before it, the Agency determines, pursuant to sections 164 and 165 of the NTA, 1987, that the operation of the Blaine Lake Subdivision from Paddockwood Junction (mileage 0.7) to a point east of Shellbrook (mileage 27.4), a total distance of 26.7 miles, in the province of Saskatchewan, is uneconomic, and that there is no reasonable probability of its becoming economic in the foreseeable future. Consequently, pursuant to subsection 165(1) of the NTA, 1987, the Agency must order the abandonment of its operation.

An Order to this effect will be issued.

Date modified: