Decision No. 296-R-2011

Introduction

[1] On June 6, 2011, Transport Action Ontario (TAO) filed a formal complaint with the Canadian Transportation Agency (Agency), following initial correspondence between the Agency and the parties. In its complaint, TAO alleges that the Canadian Pacific Railway Company (CP) failed to comply with the Canada Transportation Act, S.C., 1996, c. 10, as amended (CTA), in its discontinuance of railway operations on the Chalk River Subdivision between mileages 0.5 and 115.3 and on the North Bay Subdivision between mileages 0.0 and 70.0, as the railway lines were not identified for discontinuance in CP’s Three Year Plan, as required under section 141 of the CTA.

[2] TAO claims that it has filed its complaint in the public interest to ensure that the statutory discontinuance process is followed in this case, to clarify the rules for any future discontinuance, and to prevent improper procedures from becoming established precedents.

Issue

[3] The issue to be addressed is whether CP has complied with the process set out in the CTA for discontinuing the operation of railway lines.

Background

Lease of the railway lines

[4] In 1996, CP leased its railway lines between Smiths Falls and Coniston (near Sudbury) and between Mattawa and Temiscaming to Trans-Ontario Railway Company Limited (now RaiLink Canada Ltd.) which operated the lines as the Ottawa Valley Railway, until RaiLink Canada Ltd. terminated the lease.

Return of the lines to CP

The railway lines in question were returned to CP on two different dates.

[5] The first section of the railway lines to be returned, the Chalk River Subdivision between mileages 0.5 and 104.0 (Scott to Camspur, near Petawawa), reverted back to CP on December 18, 2009. During the period February 1 to 4, 2010, CP advertised the availability of this section of the lines for sale, lease or other transfer for continued operation, pursuant to section 143 of the CTA. CP indicates that two expressions of interest were received, but no deal was reached within the six-month timeframe as required under subsection 144(4) of the CTA. On October 6, 2010, CP notified the federal and provincial governments, a local transit authority (OC Transpo), and the affected municipalities of its offer to transfer its interests in this section of the railway lines, and each level was given 30 days to accept the offer, pursuant to section 145 of the CTA. No offers were received.

[6] Two other sections to be returned in the second instance, the Chalk River Subdivision between mileages 104.0 and 115.3 (Camspur to Chalk River) and the North Bay Subdivision between mileages 0.0 and 70.0 (Chalk River to Mattawa), reverted back to CP on April 11, 2010. On April 19, 2010, CP advertised the availability of these sections of the railway lines for sale, lease or other transfer for continued operation. CP indicates that two expressions of interest were received, but no deal was reached within the six-month timeframe. On January 13, 2011, CP notified the provincial governments, and affected municipalities, of its offer to transfer its interest in the lines, and each level was given 30 days to accept the offer. No offers were received.

[7] On May 30, 2011, CP filed notices of discontinuance with the Agency for the railway lines in question, pursuant to subsection 146(1) of the CTA.

The Law

[8] Part III Division V of the CTA outlines the provisions respecting Transferring and Discontinuing the Operation of Railway Lines.

Positions of the Parties

[9] TAO alleges that CP failed to follow the discontinuance process set out in the CTA as it did not list the railway lines in question on its “Three Year Rail Network Plan” as required by subsection 141(1) of the CTA. TAO argues that the exemption provided for in subsection 146.01(2) of the CTA, which exempts a railway company from the requirement of subsection 142(2) of the CTA that it not discontinue a railway line before the company’s intention to discontinue operating the line has been indicated on its “Three Year Rail Network Plan” for at least 12 months, does not extend to the requirement in subsection 141(1). TAO submits that given that CP failed to comply with subsection 141(1) of the CTA, the steps that CP followed according to sections 143 and 145 need to be repeated.

[10] TAO maintains that had the lines been identified for discontinuance on CP’s Three Year Plan, the information would have been available for public inspection as required under subsection 141(2) of the CTA and CP would have provided the required notices of changes to its plan to the parties identified in subsection 141(2.1). TAO maintains that CP is required to comply with the discontinuance process and should be required to repeat the steps in the process. TAO has also requested that the Agency prevent CP from removing or impairing the railway infrastructure until its complaint has been heard.

[11] CP claims that it is exempt from including the lines on its Three Year Plan, as subsection 146.01(2) of the CTA provides for an exemption for lines that have been transferred and have been returned to the railway company that transferred it. When a railway line is returned, a railway company has 60 days to resume operations on the line or follow the process set out in sections 143 to 145 of the CTA. CP maintains that as it chose the latter option, and followed the steps set out in sections 143 to 145 of the CTA, it is not subject to the requirement set out in subsection 142(2) of the CTA. CP argues that section 141 is an obligation placed on the railway company in respect of the operation of the railway lines, and these railway lines are excluded, based on the concluding words of subsection 146.01(2), that is, the railway company has no obligations under the CTA in respect of the operation of the railway line.

Analysis and Findings

Jurisdiction

[12] The Agency has the jurisdiction to deal with this complaint pursuant to sections 26 and 37 of the CTA. Section 26 provides that the Agency may require a person to do or refrain from doing anything that the person is or may be required to do, or is prohibited from doing under the CTA. Section 37 of the CTA provides that the Agency may inquire into, hear and determine a complaint concerning any act, matter or thing prohibited, sanctioned or required to be done under any Act of Parliament that is administered in whole or in part by the Agency.

This case

[13] Subsection 146.01(1) of the CTA provides that if a railway line or operating interest in the railway line returns to the railway company that transferred it, the railway company may either resume operation of the line or follow the process set out in sections 143 to 145. Subsection 146.01(2) of the CTA provides that if the railway company decides to follow the process prescribed in sections 143 to 145 in such circumstances, the company is not subject to subsection 142(2) in respect of the railway line or operating interest and has no obligations under the CTA in respect of the operation of the railway line. Subsection 142(2) provides that a railway company shall not take steps to discontinue operating a railway line before the company’ s intention to discontinue operating the line has been indicated in its Three Year Plan (as contemplated by section 141 of the CTA) for at least 12 months.

[14] In this case, CP transferred the operating interest in the railway lines in question pursuant to a lease agreement with Railink in 1996. As set out above, the operating interest in those lines reverted back to CP on December 18, 2009 and April 11, 2010. CP decided not to resume operation of the lines. Therefore, in accordance with subsection 146.01(2) of the CTA, CP was required to follow the process set out in sections 143 to 145 and is not subject to the requirement of subsection 142(2) of the CTA.

[15] CP submits that it followed the process provided for in sections 143 to 145 of the CTA. TAO does not contend that CP did not follow that process; rather, TAO maintains that CP is required to place the lines on its Three Year Plan in accordance with section 141 of the CTA because while subsection 146.01(2) specifically excludes CP from having to comply with subsection 142(2), it does not exclude it from complying with section 141. TAO submits that as CP did not comply with section 141of the CTA, it must do so now and then follow the process prescribed in sections 143 to 145 of the CTA.

[16] The Agency does not accept TAO’s position. Section 141 provides that a railway company shall maintain a plan indicating for each of its railway lines whether it intends to continue operating the line or whether within the next three years, it intends to take steps to discontinue operating the line. Clearly, this section imposes the listing obligation on railway companies with respect to railway lines that it is operating, and that they either intend to continue operating or they intend to discontinue operating.

[17] Subsection 141(3) of the CTA provides that a railway company may sell, lease or otherwise transfer its railway lines, or its operating interest in its lines, for continued operations. Subsection 146(2) of the CTA provides that if the railway line, or any interest of the railway company in it, is sold, leased or otherwise transferred by an agreement entered into through the process set out in sections 143 to 145 or otherwise, the railway company that conveyed the railway line has no obligations under the CTA in respect of the operation of the railway line as and from the date the sale, lease or other transfer was completed.

[18] The Agency is of the opinion that subsections 141(3) and 146(2) of the CTA permit a railway company to transfer a railway line for continued operation at any time, whether or not the transfer occurred as a result of the process provided for in sections 141 to 145 of the CTA. This is clear from the words “transferred by an agreement entered into through the process set out in sections 143 to 145 or otherwise” contained in subsection 146(2) of the CTA. Further, subsection 146(2) provides that once a railway line is transferred, the railway company has no obligations under the CTA in respect of the operation of the railway line as and from the date of the transfer.

[19] Therefore, as of the date CP leased the railway lines to RaiLink, CP had no further obligations under the CTA in respect of the operation of the railway lines. Upon return of the railway lines at the conclusion of the lease, CP did not operate the railway lines and did not resume operation of the lines. CP opted to follow the process prescribed in sections 143 to 145 of the CTA and therefore, it had no obligations under the CTA in respect of the operation of the railway lines. As such, it was not required to comply with section 141 of the CTA, as it cannot be concluded that it intended to continue or discontinue operating the railway lines. In such circumstance, subsection 146.01(1) of the CTA imposes on CP a positive obligation to comply with sections 143 to 145 of the CTA which it has done.

Conclusion

[20] Based on the above findings, the Agency concludes that CP has complied with the transfer and discontinuance process set out in Part III, Division V of the CTA, and was not required to list these lines on its Three Year Plan.

[21] Accordingly, the Agency dismisses TAO’s complaint.