Decision No. 116-R-1993

March 1, 1993

March 1, 1993

IN THE MATTER OF a reconsideration pursuant to section 171 of the National Transportation Act, 1987, R.S.C., 1985, c. 28 (3rd Supp.) of an application by the Canadian National Railway Company for authority to abandon the operation of a segment of the Granby Subdivision from a point near Granby (mileage 15.57) to Marieville (mileage 38.70), a total distance of 23.13 miles, in the Province of Quebec.

File No. T 6115/458


INTRODUCTION

By Order No. 1988-R-1116 and Decision No. 461-R-1988 dated December 1, 1988, the National Transportation Agency (hereinafter the Agency) ordered the Canadian National Railway Company (hereinafter CN) to continue the operation of the Granby Subdivision between Granby and Chambly and to abandon that of the West Shefford Spur between mileage 14.13 and Farnham at mileage 28.37. By Order No. 1989-R-317 dated October 13, 1989, as amended by an addendum dated November 9, 1989, the Agency varied Order No. 1988-R-1116 by authorizing the abandonment of the segment of the Granby Subdivision between mileage 9.00 and mileage 15.57. Upon reconsideration of the CN application, as amended by CN to exclude the segment between Marieville (mileage 38.70) and Chambly (mileage 44.00) from the original abandonment application, by Order No. 1991-R-375 and Decision No. 382-R-1991 dated July 18, 1991, the Agency ordered CN to continue the operation of the segment of the Granby Subdivision from a point near Granby (mileage 15.57) to Marieville (mileage 38.70) (hereinafter the branch line) and ordered that the amended application would be reconsidered within one (1) year from the date of that Order, in accordance with section 171 of the National Transporation Act, 1987 (hereinafter the NTA, 1987).

In compliance with subsection 171(2) of the NTA, 1987, the Agency published a Notice of Reconsideration on July 13, 1992 to inform the public that it was reconsidering the application to abandon the operation of the branch line and invited anyone who could provide the Agency with documented evidence that there is a reasonable probability of the branch line becoming economic in the foreseeable future to file with the Agency, within sixty (60) days from the date of issuance of the notice, a written statement setting forth any grounds of opposition. The Agency received both opposing and suppporting interventions.

When an application is opposed, the Agency is required, pursuant to section 163 of the NTA, 1987, to determine the amount of the actual loss, if any, of the railway company attributable to the operation of the branch line in each of the prescribed financial years and to cause public notice of the determination made and of the principal factors applied in making that determination. Accordingly, the Agency published an interim determination of the actual loss for the years 1989, 1990 and 1991 in a notice issued October 14, 1992. This notice invited anyone to provide the Agency, within thirty (30) days from the date of issuance of the notice, evidence establishing that there exists a reasonable probability of the branch line becoming economic in the foreseeable future and that the operation of the branch line is required in the public interest.

Pursuant to section 164 of the NTA, 1987, the Agency is required to determine whether the operation of 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 operation of 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 the abandonment of its operation. If the Agency determines that the operation of the branch line is uneconomic and that 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 it is required in the public interest, as set out in sections 166 and 167 of the NTA, 1987.

HISTORY AND LOCATION OF THE RAILWAY LINE

In 1871, The Montreal, Chambly and Sorel Company was incorporated to construct a railway from Sorel via Chambly to Montréal and from Chambly through Saint-Jean to the Province Line near Philipsburg. The company name was changed to The Montreal, Portland and Boston Railway Company (hereinafter MPBR) in 1875 and was operated by the South Eastern Railway until 1891 when the operation was taken over by the Central Vermont Railway Company. The section of rail track from Marieville to Saint-Césaire opened for traffic in 1882. In 1896, The Montreal and Province Line Railway Company was granted the right to operate the MPBR. Subsequently, The Montreal and Southern Counties Railway Company (hereinafter MSCR) was incorporated and obtained the right to operate railway services on this trackage in 1897. It extended its network to include rail track from Saint-Césaire to Abbotsford and thereon to Granby, the former opening for traffic in 1915 and the latter segment of track one year later. The Grand Trunk Railway Company of Canada secured control of the MSCR in 1906. The final successor, CN, acquired ownership of the branch line in 1955 and continues to operate it.

The Granby Subdivision is located south-east of Montréal. It extends in a northerly direction for approximately 36 miles from a point near Granby (mileage 15.57) to the end of the branch line at Castle Gardens (mileage 51.30), where it joins with the Rouses Point Subdivision. A map is attached as Appendix 1.

DESCRIPTION OF SERVICE AND TRAFFIC

Since November 1989, freight service for a wide variety of products has been operated three days a week over the branch line. For the three prescribed years under study, inbound traffic to the stations located along the branch line primarily consisted of liquefied petroleum gas, agricultural and lumber products, frozen foods and a variety of grains, while outbound traffic included mainly scrap iron. The statement of carload traffic filed by the applicant indicates that a total of 23, 95 and 20 carloads were offered for traffic over this branch line for 1989, 1990 and 1991 respectively.

CONDITION OF BRANCH LINE

In 1987, the branch line was stated by CN to be in fair condition, that is commensurate with the safe operation of freight trains. According to CN, repairs to the branch line will be required, in the short term, involving an expenditure of approximately $68,000.

ALTERNATIVE SERVICES

Alternative rail service is available from the Saint-Guillaume and Adirondack Subdivisions of Canadian Pacific Limited (hereinafter CP) and the Saint-Hyacinthe Subdivision of CN. The Granby Subdivision connects with the CP Saint-Guillaume Subdivision at Saint-Paul-d'Abbotsford (mileage 11.5), at mileage 23.7 on the CN Granby Subdivision. Rail service on the Granby Subdivision from Marieville will remain accessible to shippers in the event of abandonment. The municipalities situated along the branch line are served by Autoroute 10 and Provincial Highway No. 112.

INTERVENTIONS

On July 13, 1992, the Agency issued a notice advertising the reconsideration of the application and invited submissions from interested parties pursuant to section 161 of the NTA, 1987. Six interventions were filed with the Agency pursuant to this notice. On October 14, 1992, the Agency issued its interim Determination of Actual Loss and received three submissions in response thereof.

Papier Rouville, Inc., based in Marieville, opposes the abandonment proposal from Marieville to Chambly. Since that segment of the CN Granby Subdivision is not under consideration by the Agency, the submission of that company has not been considered in this proceeding.

FABCON Ltd. of Fredericton, New Brunswick, an installer and retailer of storage tank equipment for eastern Canada, filed an intervention in the context of the CP application relating to the proposed abandonment of portions of its Fredericton/Gibson Subdivisions. It indicated that it was negotiating purchases of storage tanks from a supplier in Granby, Quebec and that a total of 25 carloads annually of such products would be moving by rail. However, after verification of the CN traffic statement, it was determined that the tank supplier in question ships out of Marieville, a point outside the trackage segment considered for abandonment under this CN application.

The City of Granby, which wishes to acquire the railway right-of-way property within its municipal limits for urban development, supports the CN abandonment proposal. Should the Agency determine that the operation of the branch line should be continued, it requests that the Agency consider granting the part of the CN application dealing with the trackage located within the municipal limits of Granby.

ICG Propane Inc., a distributor of propane gas located on a private siding at mileage 17.82 in Granby, receives traffic mainly from Sarnia, Ontario. It opposes the abandonment proposal and requested a public hearing. Rail service, it claims, is the most suitable means of transport in light of the volume of traffic it receives. ICG Propane Inc. does not own trucks to service its Granby Branch. It requires the rail infrastructure for its movements as, if it were to convert to trucking in the event of abandonment, its operating costs would increase considerably. If the Agency were to grant the CN application, ICG Propane Inc. formally requested the Agency to suggest to the Minister of Transport that he enter into an agreement, pursuant to section 175 of the NTA, 1987, to provide a contribution to assist ICG Propane Inc. to convert its operations to another method of transport and operation. ICG Propane Inc. subsequently submitted that its traffic volume would reach 45 carloads in 1992 and between 60 and 80 carloads in 1993.

The ministère des Transports of the Province of Quebec argues that abandonment of rail service would detrimentally affect the operations of ICG Propane Inc. and for that reason it opposes the CN application. The ministère des Transports also claims that CN has not offered any suitable transportation alternative to ICG Propane Inc. as a substitute for direct rail service.

Coopexcel, located in Granby, operates a mill and proposes to invest to enable it to receive between 5,000 and 10,000 metric tons (representing some 60 to 125 carloads) of grain by rail annually. It states that rail transport will produce savings to the company. However, no concrete evidence that this development will proceed was filed with the Agency.

Local 206 of the Canadian Brotherhood of Railway, Transport and General Workers opposes the application. Bearing in mind the congested highway network of the South Shore and the environmental impact of an abandonment, it would like to see the line upgraded for the operation of commuter train services linking Granby to Montréal.

ACTUAL LOSSES

The Agency has made the following final determination of the amounts of the actual losses incurred by CN in the operation of the branch line for each of the prescribed financial years:

Year Total Costs $ Revenues $ Actual Loss $ Carloads
1989 96,033 98,724 (2,691) 34
1990 245,364 278,526 (33,162) 95
1991 133,619 85,544 48,075 20

The Agency makes its determination of the actual losses incurred by the applicant in operating the branch line by considering traffic which originates or terminates on the branch line. For the purposes of this determination, an adjustment of traffic and associated revenues was made to the 1989 prescribed financial year, in addition to the adjustment made as part of the Agency decision in 1991. Eleven unrecorded car movements of ICG Propane Inc. were not reported by CN. This understatement resulted in an increase in the volume of traffic from 23 to 34 carloads and a supplement in net revenues of $8,822.

Further, the final determination of the Agency reflects the specific characteristics of the branch line. As a result, adjustments were made to the gross book investment since the original claim of CN included costs for assets that were not part of the trackage segment proposed for abandonment. This materially impacted the on-line depreciation and cost of capital items.

Pursuant to paragraph 163(1)(c) of the NTA, 1987, the Agency must give public notice of its determination of the actual losses and of the principal factors applied in making that determination. The final determination and a breakdown by cost category are given in Appendix 2. This determination of the actual losses has been made in accordance with the provisions of the Railway Costing Regulations, SOR/80-310 and section 157 of the NTA, 1987.

ECONOMIC DETERMINATION

The Agency has reviewed all the submissions and material on file and determines that a decision can be rendered based on the information on file and that a public hearing, as requested by ICG Propane Inc., is not necessary in this case.

The Agency has recognized in its analysis that, as a result of recent Federal Court decisions, it is mandatory that the Environmental Assessment and Review Process Guidelines Order, SOR/84-467 be applied to all government decisions, including decisions and orders issued by the Agency. In consultation with the Federal Environmental Assessment Review Office, the Agency has established an exclusion list of Agency activities which do not warrant environmental assessment. Branch line abandonment cases have been excluded on the grounds that there would be either no impact or that there are readily available mitigative measures available to all parties to counter any negative impact which could be hypothesized to arise from the abandonment of the operation of a branch line.

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

It is evident from the final determination of the amounts of actual losses that CN realized a profit of $2,691 and $33,162 in 1989 and 1990 respectively and incurred a loss of $48,075 in 1991. The Agency therefore concludes that this branch line is presently uneconomic.

In determining whether there is a reasonable probability of the operation of the branch line becoming economic in the foreseeable future, the Agency gave careful consideration to all submissions received from the interveners and CN.

As stated above, CN made a profit in the 1990 financial year; however, the Agency notes that the improvement is due largely to increased revenues from the ICG Propane Inc. carload traffic. CN explained, in its semi-annual marketing report dated January 9, 1991 required by Agency Order No. 1988-R-1116, that the increase was attributable to a minimal utilization of the ICG Propane Inc. Ste. Catherine plant during the amerindian crisis during the summer of 1990, and the resulting diversion of the traffic to the Granby plant. This allegation was reiterated in the CN submission of December 10, 1992, and this statement was not refuted by ICG Propane Inc.

Notwithstanding the ICG Propane Inc. exceptional movement in 1990, the Agency notes that the ICG Propane Inc. carload traffic for the three prescribed financial years averaged 29 cars. In a letter dated October 20, 1992, ICG Propane Inc. asserts that its 1992 traffic volume will have attained 45 carloads. For 1993, ICG Propane Inc. foresees a minimum of 60 to 80 carloads.

Coopexcel, a potential shipper, expects to receive 60 to 125 cars of grain annually by rail. In the past, this company made use of this rail line but has not done so since 1990. However, the Agency has no concrete evidence from either Coopexcel or CN that this potential future traffic will materialize in the foreseeable future. According to the CN submission of December 10, 1992, Coopexcel wishes to diversify its operations and re-enter the animal feed market. Its supplies could originate from Western Canada, Ontario and American markets. CN adds, however, that Coopexcel could also obtain its supplies from local markets, such as in Montréal. Specific details on this project are not known to CN and it is therefore unable to assess its economic potential with respect to traffic transiting by rail to Granby.

No other user or potential shipper has come forward to lead the Agency to believe that the branch line could become profitable in the near future.

Furthermore, it is evident from the final determination of the Agency that major maintenance and repairs have been deferred over the last three years on the branch line. As stated in its letter dated June 15, 1992, CN estimates that an amount of approximately $68,000 will have to be expended, in the short term, to render the branch line in good operating condition and this would result in increasing the loss attributable to the operation of the branch line.

Upon consideration of the submissions from active and potential shippers on the branch line and the actual loss incurred by CN in the operation of the branch line, despite the improvements recorded in 1989 and 1990, the Agency finds that, pursuant to section 164 of the NTA, 1987, there are no reasonable probability of the operation of the branch line becoming economic in the foreseeable future.

CONCLUSIONS

Pursuant to section 164 of the NTA, 1987, the Agency determines that the operation of the branch line is presently uneconomic and that there is no reasonable probability of its operation becoming economic in the foreseeable future. Therefore, pursuant to subsection 165(1) of the NTA, 1987, the operation of the branch line must be ordered abandoned.

In its initial submission to the Agency, ICG Propane Inc. requested that the Agency recommend to the Minister of Transport, pursuant to section 175 of the NTA, 1987, that he enter into an agreement with the company to provide a financial contribution towards the transition to an alternate transport service in the event abandonment occurs. The Minister of Transport has the sole authority to grant such monetary assistance after evaluation of how the abandonment of the branch line could cause significant economic harm to the operations of the company.

Pursuant to paragraph 168(1)(b) of the NTA, 1987, the Agency will order that the operation of the branch line be abandoned on January 31, 1994, to permit existing shippers on this branch line to arrange alternate transport service.

An Order to this effect will be issued.

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