Decision No. 870-R-1995

December 29, 1995

December 29, 1995

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 Cayuga Subdivision from Feeder West (mileage 22.00) to Delhi (mileage 81.00), including the segment of the Simcoe Spur between mileages 0.00 and 0.95, a total distance of 59.95 miles, in the province of Ontario.

File No. T 6115/372


BACKGROUND

On July 11, 1995, the Canadian National Railway Company (hereinafter CN) filed with the National Transportation Agency (hereinafter the Agency) a notice of intent to apply for the abandonment of the operation of the Cayuga Subdivision from Feeder West (mileage 22.00) to Delhi (mileage 81.00), including the segment of the Simcoe Spur between mileages 0.00 and 0.95 (hereinafter the branch line). CN also filed an environmental impact assessment of its project for the abandonment of the operation of the branch line pursuant to the Canadian Environmental Assessment Act, S.C., 1992, c. 37 (hereinafter the CEAA) and the Inclusion List Regulations.

On September 14, 1995, CN requested an abridgement of time to file its abandonment application. The Agency granted CN's request and, on September 19, 1995, CN filed its application.

A map of the area is attached as Appendix 1.

LEGISLATIVE PROVISIONS

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 days after the date of the notice given under subsection 160(5) of the NTA, 1987, 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. In response to the notice of application, nine submissions were received.

Where an application is opposed, the Agency is required to determine the amount of the actual loss, if any, of the railway company attributable to the branch line in each of the prescribed financial years and give public notice of its determination as set out in section 163 of the NTA, 1987. Consequently, the Agency issued on December 6, 1995 a notice of its interim determination of the amount of the actual loss for the years 1992, 1993 and 1994 based on the information submitted by CN. The Agency also issued its preliminary environmental screening report. In response to the notice and the preliminary environmental screening report, the Agency received submissions from the Rail Ways to the Future Committee/Transport 2000 Ontario Inc. (hereinafter the RWFC) and J + J Packaging.

The NTA, 1987 requires the Agency to determine whether a branch line is economic or uneconomic and, if uneconomic, whether there is a reasonable probability that it will become economic in the foreseeable future. Should the Agency find that a branch line is uneconomic and that there is no reasonable probability of it becoming economic in the foreseeable future, subsection 165(1) of the NTA, 1987 requires the Agency to order the abandonment of its operation. If the Agency determines that a branch line is economic or that where it is uneconomic there is a reasonable probability of it becoming economic in the foreseeable future, the Agency must still order the abandonment of the operation of a branch line unless it determines that the operation of 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.

Since January 19, 1995, the Agency is subject to the CEAA and is required, pursuant to subsection 18(1) of the CEAA, to assess the environmental effects of projects for the abandonment of operation of a railway line before granting the authority to do so.

EVIDENCE

CN

CN indicated that the Cayuga Subdivision between Robbins (mileage 12.00) and St. Thomas (mileage 119.00) was constructed by the Canada Air Line Railway Company and was opened for traffic in 1873. It became part of the CN rail system in 1923 after a series of amalgamations of various railway companies. The segment that CN proposes to abandon extends from Feeder West (mileage 22.00) to Delhi (mileage 81.00) and includes a 0.95 mile segment of the Simcoe Spur. Stations affected by the proposed abandonment include Cayuga (mileage 48.72), Nelles Corners (mileage 54.07), Jarvis (mileage 62.67) and Simcoe (mileage 73.23).

After review of the potential carload traffic from shippers, CN concluded that there was no reasonable probability of the branch line becoming economic. CN submitted that existing carload traffic could be handled adequately by trucks. In the event that the operation of the branch line be ordered continued, CN submitted that it will have to incur a total of $3,670,000 to rehabilitate, upgrade and maintain the branch line at the existing timetable operating conditions and speed limit. CN estimated that 10,706, 16,095 and 9,992 carloads in 1992, 1993 and 1994 respectively were bridged over the branch line. According to CN, this traffic no longer bridges over the Cayuga Subdivision.

Interveners

Mr. Jason Snell, President of J + J Packaging, objected to the proposed abandonment. His company is involved in packaging sodium bentonite. All of the raw material needed by the company is received by rail, amounting from three quarters to one full carload a week, which yields three to four truckloads of finished product. He has made several renovations to the existing site to improve business and, should the application be granted, he submitted that all this time and money will have been wasted. Mr. Snell also claimed that he was investigating proposals which would increase his business substantially to a level whereby he could require four to five carloads a week. He added that the traffic of Armstrong Milling Co. Ltd. was anticipated to increase. Should his business facilities be forced to close, the results would be an economic loss to the company and the community. While relocation is a possibility, Mr. Snell submitted that the company would lose money and possibly some business. If the branch line is abandoned, he hoped that he would be given sufficient time to wind down his business or find suitable facilities located on another line of railway. Mr. Snell proposed that a segment of the subdivision be maintained until a short-line operator is found. He suggested that a seven-mile portion of track be retained in order to enable him to continue his business by having traffic rerouted to Hagersville and subsequently switched to Nelles Corners. According to Mr. Snell, although CN provided him with possible alternative locations where his traffic could be brought by rail and then off-loaded into trucks, none of these locations were adequate.

Mr. Ken Zantingh of Armstrong Milling Co. Ltd. opposed the abandonment. As the company is located at Nelles Corners, he suggested that CN leave an eight-mile portion of track in place between Nelles Corners and Jarvis and construct a spur connecting with the CN Hagersville Subdivision.

Mr. John Weir, Operations Manager for Pestell Group, also objected to the proposed abandonment, particularly with respect to provision of service to J + J Packaging. It has a contract with J + J Packaging for packaging bentonite clay and over the past three years, this volume amounted to over 40 carloads per year. Mr. Weir further indicated that its future plans included a doubling of its current volumes. Should the operation of the branch line be ordered abandoned, Mr. Weir submitted that the company may have to seek a packaging company in the United States. This would also mean a loss of jobs. If abandonment were to occur, he requested assurance that a minimum of eight months notice of closure be given. Mr. Weir added that he supported J + J Packaging's request to delay the issuance of a decision until all avenues have been investigated, such as the sale of the subdivision to a short-line operator or the proposal to serve Nelles Corners from the Nanticoke Subdivision.

The Regional Municipality of Haldimand-Norfolk objected to the proposed abandonment submitting that the abandonment of the branch line would affect the Judd Industrial Park. The Municipality claimed that rail service to both existing and future industries was important from an economic development perspective. Should the branch line be abandoned, the industries presently using rail service would be forced to use trucks. The Municipality further submitted that two relatively new businesses located in Nelles Corners utilize CN services. It submitted that these businesses would need 50 or more rail cars in 1995. As an alternative to abandonment, the Municipality suggested that consideration be given to retention of the branch line from Jarvis to Nelles Corners as a spur to serve Nelles Corners as part of the CN Hagersville Subdivision. The Municipality concluded by submitting that conveyance of the branch line to a short-line operator should be contemplated, and if the operation of the branch line is to be abandoned, existing customers should be given time to adjust their operations.

The Township of Delhi advised that it would prefer that the branch line remain in operation. It submitted that several local industries are served by the branch line and closure would restrict service to that of a local "wayfreight" type. The Township further indicated that available through rail service was an important aspect to its economic development program. Should the branch line be abandoned, it recommended that the abandoned right-of-way remain intact as one continuous parcel of land for utility or recreational purposes.

VanDerMolen Farms Inc. provided a letter containing comments, concerns, suggestions and possible uses of abandoned railway lines. The main thrust of the submission dealt with fences, weeds, trees, animals, and drainage.

The Minister of Transportation of the Province of Ontario requested that the branch line not be abandoned and that the abandonment application be reconsidered in three years. As an alternative, the Minister requested that the Agency segment the branch line in order to retain the segment between Nelles Corners and a point just west of the Hagersville Subdivision. The Minister shared the views of several interveners who submitted that this segment could become economic if it were linked operationally with the Hagersville Subdivision. In the event that the operation of the branch line is ordered abandoned, the Minister considered it to be in the public interest to fix the date of abandonment at one year after the date of the abandonment order.

The Haldimand Federation of Agriculture objected to the proposed abandonment and expressed its concerns with respect to various matters such as site contaminations, weed control, fencing, drainage, farm crossings, gates, and hunting.

Mr. Joe Clark opposed the abandonment submitting that too many railway lines have been closed. In addition, Mr. Clark expressed the view that under no conditions should the land be sold to adjacent property owners or anyone else if the branch line were ordered abandoned and that it should remain the property of CN.

The RWFC was concerned over the level of bridge traffic on the branch line. It contended that such traffic should be taken into consideration by the Agency in its determination of the amounts of actual loss. Further, the RWFC submitted that the branch line may be required in the future should every level of government cooperate and examine the role of taxation of the railway companies' rights-of-way. It expressed the view that trucks were damaging the highways and the railways were disappearing because railway companies have to pay the full cost of maintaining their rights-of-way while trucks do not. A better balance could be achieved by exempting the railway companies' rights-of-way from property tax.

J + J Packaging requested an extension of time to file comments on the Agency's preliminary environmental screening report and, by letter dated December 18, 1995, the Agency granted it until December 22, 1995 to do so. J + J Packaging disagreed with certain sections of the preliminary environmental screening report. It did not accept CN's submission that industries in the area had been making use of trucking services for a number of years. It submitted that the use of trucks would double its transportation costs and force it out of business. It also submitted that it could not afford to use trucks unless it was provided with the necessary funds to purchase a truck and unloading equipment. It reiterated that should the branch line be abandoned, it would be forced to close its business facilities, which would affect all of its employees.

AGENCY FINDINGS

Actual Losses

On December 6, 1995, the Agency issued its interim determination of the amount of the actual loss incurred in the operation of the branch line for the years 1992, 1993 and 1994 based on the information submitted by CN. No new evidence was presented in response to the interim determination which would suggest that the interim determination should be varied.

Therefore, in accordance with the provisions of the Railway Costing Regulations, SOR/80-310 and section 157 of the NTA, 1987, the final determination of the amount of the actual loss is as follows:

FINAL DETERMINATION OF ACTUAL LOSS
Year Total Costs Total Revenues Actual Loss
1992 $682 000 $ 133 125 $548 875
1993 $436 416 $ 129 918 $306 498
1994 $526 715 $ 133 833 $392 882

Economic Determination

Carload traffic handled on the branch line during the prescribed financial years of 1992, 1993 and 1994 is as follows:

CARLOAD TRAFFIC BY STATION
Station 1992 1993 1994
Cayuga (m. 48.72) 14 6 3
Nelles Corners (m. 54.07) 10 19 38
Jarvis (m. 62.67) 3 - -
Simcoe (m. 73.23) - 3 -
Total 27 28 41

Train service provided on the branch line is on an "as and when required" basis and averages approximately one trip a week. At the current level of train service, carload traffic increased from 27 carloads in 1992 to 41 carloads in 1994. Despite the increase in traffic, actual losses are still incurred by the railway company. With annual losses during the prescribed financial years averaging approximately $416,000, the Agency must conclude that the branch line is presently uneconomic.

Probability of the branch line becoming economic

Under the NTA, 1987, where the Agency determines that a branch line is uneconomic, it must make a determination as to whether there is a reasonable probability of it becoming economic in the foreseeable future. In determining whether there exists a reasonable probability of the operation of a branch line becoming economic in the foreseeable future, the Agency examines ways in which revenues could be increased or costs reduced, amongst other matters. During the prescribed financial years of 1992, 1993 and 1994, the Agency notes that overall traffic and revenues increased. Only two interveners presented evidence with respect to future traffic volumes, namely J + J Packaging and the Pestell Group. The Agency is of the view that even if volumes were to increase to the forecasted levels, there is no reasonable probability of the branch line becoming economic in the foreseeable future. Service is being provided on an "as and when required" basis which means that the 1994 costs could not be reduced further. Even with 41 carloads in 1994, the highest level of traffic of the three years, CN incurred actual losses of approximately $392,000.

Because the greater part of the traffic is handled out of the Nelles Corners station, some interveners suggested that CN maintain an eight-mile segment of track from Nelles Corners to Jarvis. According to CN, a connection does exist between its Hagersville Subdivision (mileage 4.34) and its Cayuga Subdivision (mileage 61.44). Therefore, no additional expenses would be incurred to establish a track connection which would make it possible for Nelles Corners traffic to be rerouted via Brantford and the Hagersville Subdivision. However, CN indicated that the existing roadswitchers operating on the Hagersville Subdivision are currently running at full capacity and overtime charges are constantly being incurred. Further, CN submitted that it was unlikely that these units would have the time required to perform the local switching. Therefore, if service were to be made available to Nelles Corners, the cost of providing service would be fully allocated to this segment of the branch line. CN provided an estimate of the cost involved in providing this dedicated service to the Agency and requested that it be considered confidential. The Agency has reviewed and considered this proposal and has determined that while there may be merit to such an arrangement, the cost of sustaining such a service would be considerable in light of the forecasted traffic volumes offered.

Accordingly, with no other evidence being submitted with respect to future traffic, the Agency determines that there is no reasonable probability of the branch line or any segment of the branch line becoming economic in the foreseeable future and that the operation of the branch line should therefore be abandoned. However, the Agency is of the view that the shippers utilizing the branch line require time to adjust their operations in absence of rail service. Therefore, the Agency will order the abandonment of the operation of the Cayuga Subdivision from Feeder West (mileage 22.00) to Nelles Corners (mileage 54.07) and from Jarvis (mileage 62.67) to Delhi (mileage 81.00), including the Simcoe Spur between mileages 0.00 and 0.95, thirty (30) days from the date of the abandonment order. The operation of the Cayuga Subdivision between Nelles Corners (mileage 54.07) and Jarvis (62.67) will be abandoned one (1) year from the date of the abandonment order; service on this segment of the branch line will continue to be provided via Brantford and the Hagersville Subdivision.

OTHER MATTERS

The Minister of Transport of the Province of Ontario submitted that CN's application was premature considering the privatization of CN and the proposed Canada Transportation Act and the proposed Ontario Shortline Railways Act, which were designed to facilitate the continuation of rail service through the transfer of railway lines which would otherwise not be commercially viable to short-line operators. The Minister was of the view that these pending major legislative changes are not in keeping with the national transportation policy set out in section 3 of the NTA, 1987. The Minister requested that an adjournment of proceedings be granted as it considered that the Agency has broad powers under section 39 of the NTA, 1987 that would permit the adjournment.

By letter dated December 21, 1995, the Agency denied the Minister's request for an adjournment.

ENVIRONMENTAL ASSESSMENT

Under subsection 18(1) of CEAA, the Law List Regulations and the Inclusion List Regulations, the Agency must assess the environmental implications of projects for the abandonment of the operation of railway lines before granting the authority to do so. An environmental assessment must be conducted on any physical activity relating to the abandonment of freight operations on a railway line that requires an order under section 162, subsection 165(1) or section 166 of the NTA, 1987.

On December 6, 1995, the Agency issued its preliminary environmental screening report pertaining to CN's abandonment project. No potentially adverse environmental effects which could arise as a result of the proposed abandonment were identified. Although J + J Packaging filed comments pertaining to the preliminary report, the comments were not directed at the environmental effects of the abandonment project.

The Agency has further considered its preliminary environmental screening report and the evidence filed by J + J Packaging and finds that, pursuant to subsection 20(1) of CEAA, the project is not likely to cause significant adverse environmental effects and the project may be carried out.

A copy of the final screening decision of the Agency is attached as Appendix 2.

CONCLUSION

After consideration of all evidence received and on file, the Agency, pursuant to sections 164 and 165 of the NTA, 1987, determines that the branch line is uneconomic and that there is no reasonable probability of it becoming economic in the foreseeable future. Therefore, the operation of the branch line should be ordered abandoned.

Section 168 of the NTA, 1987 provides that the Agency shall fix a date for the abandonment of the operation of a branch line that is not less than thirty (30) days or more than one (1) year from the date of the abandonment order. The Agency shall order the abandonment of the operation of the Cayuga Subdivision from Feeder West (mileage 22.00) to Nelles Corners (mileage 54.07) and from Jarvis (mileage 62.67) to Delhi (mileage 81.00), including the Simcoe Spur between mileages 0.00 and 0.95, thirty (30) days from the date of the order giving effect to this Decision. In order to give shippers time to adjust their operations, the operation of the Cayuga Subdivision between Nelles Corners (mileage 54.07) and Jarvis (mileage 62.67) shall be abandoned one (1) year from the date of the order giving effect to this Decision.

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