Letter Decision No. LET-R-52-2013

March 13, 2013

Complaints filed pursuant to the Canada Transportation Act, S.C., 1996, c. 10, as amended.

File No.: 
12-05927

INTRODUCTION

F. Ménard Inc. and Meunerie Côté-Paquette Inc. (complainants) filed with the Canadian Transportation Agency (Agency) individual  complaints against Montreal, Maine & Atlantic Railway, Ltd. and its subsidiary Montreal, Maine & Atlantic Canada Co. (MMA) related to level of service obligations and allegations that MMA contravened the discontinuance process prescribed by the Canada Transportation Act (CTA). The complaints relate to MMA’s termination of rail service to the complainants onthe St. Guillaume Subdivisionbetween mileages 0.29 and 24.70, in the province of Quebec.

These complaints raise issues related to level of service and alleged discontinuance of a line.

This Decision deals solely with the issues related to the discontinuance provisions of the CTA. The Agency will address the other issue raised in the complaints separately.

ISSUES

With respect to the allegations related to the discontinuance of a line, the Agency has identified the following issues:

  1. Segmentation of the railway line: Has MMA contravened Division V of the CTA by listing only the centre portion of the line?
  2. Termination of service: Has MMA contravened Division V of the CTA by terminating service to the complainants on July 16, 2012?

BACKGROUND

The St. Guillaume Subdivision is located between Ste-Rosalie, Quebec and Farnham, Quebec.

On March 15, 2012, MMA gave notice of its intention to discontinue its St. Guillaume Subdivision between mileages 0.29 and 24.70 (Railway Line). MMA also placed the Railway Line on its Three-Year Plan.

In its letter, MMA submits that a high proportion of the traffic on the Railway Line is subject to regulated interswitching rates set under the CTA and that these rates do not provide MMA with sufficient revenues to own and maintain the Railway Line to the standards permitting safe rail operation over the intermediate and long terms.

On July 16, 2012, MMA gave notice to all shippers and, on the same day, halted traffic on the Railway Line.

PRELIMINARY MATTER

The F. Ménard Inc. and Meunerie Côté-Paquette Inc. complaints deal with the same railway company; refer to the same section of the track; stem from the halting of rail service; and reference the same sections of the CTA. The complainants are requesting the same remedies where the only difference relates to the incremental costs of trucking due to the difference in their respective volumes of traffic. Furthermore, the complainants have common representation. The Agency therefore joins the two complaints.

ISSUE 1: SEGMENTATION OF THE RAILWAY LINE

Positions of the parties

The complainants

The complainants submit that MMA has listed the Railway Line to be discontinued while retaining the track between mileages 0.00 to 0.29, which allows service to Bell-Gaz, and retaining the track between mileages 24.70 to 27.38, which allows service to Bunge Corporation.

The complainants acknowledge that subsection 140(1) of the CTA allows a railway company to discontinue a portion of a railway line; however, they argue that the provisions in Division V were not intended to allow a railway company to discontinue segments of a railway line with low volumes of traffic and retain segments with higher volumes of traffic.

The complainants note that the Agency, in Decision No. 357-R-2007, stated that “one of the key components of the CTA is to provide a more commercially oriented process for railway companies to sell or lease surplus railway lines to new operators rather than discontinue service.” The complainants suggest that segmenting the Railway Line does not allow interested parties to make a reasonable offer to purchase the Railway Line and that this is a contravention of the intention of Parliament.

The complainants maintain that the Agency found, in Decision No. 530-R-1998, that when a section of a railway line is functionally connected to the railway company’s lines in the offer and when they do not represent a disproportionate addition, there should be some scope for them to be added.

MMA

MMA states that its “Notice of Discontinuance” dated March 15, 2012 is “complete and accurate in every respect.”

MMA contends that the complainants’ arguments related to the segmentation of the Railway Line are without merit. Further, MMA submits that Decision Nos. 357-R-2007 and 530-R-1998 are not relevant to the present case.

MMA notes that subsection 140(1) of the CTA defines a railway line as a portion of the railway line and that the Railway Line listed in its Three-Year Plan is a portion of a railway line.

Analysis and findings

In Decision No. 210-R-2012, the Agency found that:

The Agency’s jurisdiction pursuant to Division V of the CTA is to determine whether the railway company has:

  1. prepared and kept up to date a plan indicating its intentions for each of its railway lines; and,
  2. complied with the steps described in Division V prior to discontinuing operations.

The Agency finds that, based on the definition of a railway line in subsection 140(1) of the CTA, “[i]n this Division, ‘railway line’ includes a portion of a railway line [...],” a railway company may discontinue a portion of a railway line.

With respect to Decision Nos. 530-R-1998 and 357-R-2007, both cases dealt with situations where the railway line for which the railway company indicated its intention to discontinue operating was not identical to the railway line that was offered for sale. Further, the Agency notes that in Decision No. 530-R-1998, the Agency found that:

[W]hen the railway lines which are subsequently added are functionally connected to the railway lines in the offer and when they do not represent a disproportionate addition, there should be some scope for them to be added.

The Agency therefore agrees with MMA, and finds that neither of these cases provides guidance in the current case, as MMA has been consistent in its intention to discontinue operating the Railway Line.

The Federal Court of Appeal, in upholding Decision No. 357-R-2007, (2008 FCA 395) stated that:

[41]The prohibition in subsection 142(2) to start the discontinuance process applies not only when there is discontinuance of a line, but also, as envisaged by the definition of “railway lines”, when there is discontinuance of “a portion of a railway line. This is the conclusion reached by the Agency. It is one which, in my view, meets the letter and the spirit of the provision as well as the objectives of the Act.

In Decision No. 445-R-1997, the Agency stated that:

[T]he provisions of Division V of the CTA are intended to promote the normal business management of railway assets and operations by a railway company, as well as to encourage the continuation of railway services wherever possible through the takeover of railway lines by new operators in situations where the current railway operator does not wish to continue to provide service.

Given the above, the Agency finds that, with respect to the segmentation of the Railway Line, MMA has not contravened Division V of the CTA.

Conclusion

The Agency finds that MMA did not contravene Division V of the CTA by indicating its intention to discontinue operating the Railway Line between mileages 0.29 and 24.70 of the St. Guillaume Subdivision and not including the mileages between 0.00 and 0.29 and mileages 24.70 to 27.38 of the St. Guillaume Subdivision.

ISSUE 2: TERMINATION OF SERVICE

Positions of the parties

The complainants

The complainants submit that, pursuant to the CTA, MMA is obligated to provide the required services until such time as the Railway Line is either transferred or discontinued.

MMA

MMA does not address this particular issue, but confirmed that it halted service to the complainants on the Railway Line on July 16, 2012.

Analysis and findings

It is uncontested that on July 16, 2012, MMA halted service to the complainants. The complainants submit that this is contrary to the CTA. The Agency notes that subsection 142(1) states that “a railway company shall comply with the steps described in this Division before discontinuing operating a railway line” and further, subsection 142(2) requires that “a railway company shall not take steps to discontinue operating the line before the company’s intention to discontinue operating the line has been indicated in its plan for at least 12 months.”

Direction to show cause

Based on the above, the Agency provides MMA with an opportunity to show cause why the Agency should not find that the termination of service to shippers on the Railway Line is equivalent to discontinuing operations and therefore, contrary to Division V of the CTA.

If this is, in fact, a discontinuance of a railway line, MMA is reminded of its obligations prescribed by Division V of the CTA.

MMA has until April 3, 2013 to file its response with the Agency, with a copy to the complainants. The complainants will have until April 10, 2013 to file their comments, with a copy to MMA. MMA will then have until April 15, 2013 to file any comments it may have.

Should you have any questions, you may contact Krista Warnica by telephone at 819-953-9928, facsimile at 819-953-5564, or e-mail at krista.warnica@otc-cta.gc.ca.

Member(s)

Jean-Denis Pelletier, P.Eng.
J. Mark MacKeigan
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