Decision No. 463-R-2010
November 5, 2010
RECONSIDERATION of Decision Nos. LET-R-74-2008 and LET-R-75-2008 dated April 30, 2008 and Decision No. 378-R-2008 dated July 21, 2008 and Decision No. 385-R-2008 dated July 24, 2008.
File Nos. T 6338/198
T 6338/025
Introduction
[1] Pursuant to section 146.3 of the Canada Transportation Act, S.C., 1996, c. 10, as amended (CTA), the Town of Bengough and the Rural Municipality of Bengough No. 40 (Bengough) and the Rural Municipality of Souris Valley No. 7 (Souris Valley) [collectively the Municipalities], each applied for determinations by the Canadian Transportation Agency (Agency) of the net salvage value (NSV) of railway lines owned by the Canadian Pacific Railway Company (CP), namely CP's Radville Subdivision (mileage 0.5 to mileage 70.5) in the case of Bengough and CP's Bromhead Subdivision (mileage 0.1 to mileage 41.0) in the case of Souris Valley (the subdivisions).
[2] On April 30, 2008, the Agency issued interim decisions on the NSV of the subdivisions, excluding a value for the land component of each, in Decision No. LET-R-74-2008 regarding the Radville Subdivision and Decision No. LET-R-75-2008 with respect to the Bromhead Subdivision. Final NSV determinations were set out in Decision No. 378-R-2008 dated July 21, 2008 for the Radville Subdivision and in Decision No. 385-R-2008 dated July 24, 2008 for the Bromhead Subdivision. The final NSV determination on the Radville Subdivision excluded an assessment of land value and therefore did not change from the NSV set out in the interim decision for that subdivision. For the Bromhead Subdivision, the final NSV did include a land value, and therefore the NSV set out in the interim decision was adjusted accordingly.
[3] Subsequent to these final decisions, the parties filed appeals and cross appeals with the Federal Court of Appeal (FCA) on various grounds, one of which was the position taken by the Agency with respect to the non-application of certain municipal reclamation by-laws to the NSV determinations.
[4] In rulings issued March 19, 2010, (2010 FCA 80, in the case of Bromhead and 2010 FCA 81, in the case of Souris Valley), the FCA upheld the Agency's decision on the non-application of the reclamation by-laws to a determination of NSV, but referred the matters back to the Agency for a specific reconsideration, irrespective of the applicability of the municipal by-laws, of the relevance of costs related to the levelling of the rights of way to the NSV determination of the subdivisions.
The law
[5] For all legislative references refer to the Appendix at the end of this Decision.
Preliminary matters
[6] In Decision Nos. LET-R-91-2010 and LET-R-92-2010 dated May 28, 2010, the Agency laid out a process, which was subsequently extended at the request of the Municipalities, for the parties to make submissions on the questions raised for the Agency's consideration by the FCA. In the course of making these submissions the Municipalities made certain requests to the Agency:
- Both requested that the Agency review its evaluation of the quality and market value of the track assets on the subdivisions, pursuant to section 32 of the CTA;
- Bengough requested that the Agency value the land comprising the Radville Subdivision; and,
- Souris Valley (and Bengough) requested that the Agency revalue the land comprising the subdivisions.
[7] The Agency will deal first with these requests, before addressing the substantive issue raised by the FCA.
I. Request by the Municipalities that the Agency review its evaluation of the quality and market value of the track assets on the subdivisions, pursuant to section 32 of the CTA
Positions of the parties
[8] The Municipalities argue that it is the Agency's consistent practice to incorporate values which best approximate in time the actual salvage or transfer value of the railway line in question. They submit that there have been two significant changes in circumstances that affect the value of the track materials on the subdivisions.
[9] The Municipalities submit that there has been a significant increase in the available supply of 80 lb. and 85 lb. rail resulting from rail line discontinuances in the Prairie Provinces, which would tend to reduce the demand for the rail salvaged from the subdivisions. Accordingly, the Municipalities request that the Agency vary its NSV determinations to treat all the rail forming the subdivisions as scrap for the purposes of determining NSV.
[10] The Municipalities also submit that the change in steel prices since the issue of the Agency's interim decisions constitutes a change in circumstances that warrants a variance of the Agency's previous valuation of track materials and they provide a contractor's quote for three-foot sections and random lengths of rail as evidence to support their position.
[11] CP notes that the Agency has already classified the track materials on the subdivisions as either relay or scrap in the Statements of Track Materials. However, CP agrees with the Municipalities that there has been a change in steel prices since the Agency's interim decisions and that the Agency should review the valuation of the track materials, indicating that the values for all reusable and scrap steel track materials are much higher than those stated in the interim decisions, and that there is a strong demand for 80 lb. and 85 lb. CP provides various commercial correspondence and other data to support its position.
Analysis and determination
[12] It is important to stress that the review contemplated by section 32 of the CTA is not an open authority for the Agency to review its decisions. The Agency's jurisdiction under this section is limited and only arises if there has been a change in the facts or circumstances pertaining to the decision since its issuance. Accordingly, the Agency must first determine whether there has been a change in the facts or circumstances pertaining to the decision sufficient to trigger a review and, if so, then determine whether the new facts or circumstances justify rescission or variance of the decision.
[13] The Agency's valuation of track materials is a two-stage process; first, determining the functional classification of the assets, and second, establishing the market price for each category. The Municipalities request that all of the 80 lb. and 85 lb. rail forming the subdivisions be classified as scrap, based on their perception of the current supply and demand market forces for that material. However, the Agency's classification of materials as to quality and quantity for NSV purposes is an engineering exercise, which evaluates the "as-is" condition of the track materials that is the result of the wear and tear associated with carrying traffic, from the perspective of continued functionality. It does not take issues of supply and demand into account. Those are accounted for in the market prices of the materials, determined by a market survey conducted for each net salvage valuation.
[14] At the time the original evaluation of the qualities and quantities of the materials on the subdivisions was done, there had been no or very little traffic on the lines for approximately six years. There has been no evidence submitted which would support that in the approximately two years it has taken for the parties' appeals to be decided there has been a change in this traffic pattern. Consequently, the Agency does not see any change in facts or circumstances that would warrant a change to the functional classification of materials on the subdivisions.
[15] The Municipalities further request that the Agency vary its earlier determination to reflect the current market prices for scrap rail in Saskatchewan based on their perception that since the Agency's interim decisions, the market prices for steel have changed. CP supports that the value of the rail assets should be updated.
[16] In considering this request, the Agency first notes that the Municipalities' grounds for this request are based largely on a premise that the Agency does not accept; i.e., that the functional classification of the assets is predicated on current market conditions rather than on their physical characteristics.
[17] The fundamental issue that the Agency has to consider with this request, accepting that fluctuations in the market value of rail materials and other assets are inevitable over time, is whether the current circumstances represent sufficient cause for the Agency to revisit a final NSV determination. In these cases, the circumstance of the parties' appeals to the FCA, for reasons not in any way related to the market value of the track assets laid out in the Agency's final decisions, led to a delay in their negotiations and potential subsequent execution of a transfer agreement. While the appeals were being heard, time passed and fluctuations in the market value of rail materials occurred.
[18] An Agency determination of net salvage value is the product of the Agency's assessment of values and costs, based upon best evidence at the time of the determination. Upon application, the Agency researches and determines a market value for each of the components of a railway line, which, once decided, cannot be changed except for exceptional circumstances outside the control of the parties. In this instance, if the Agency were to acknowledge that the passage of time associated with a legal challenge was sufficient cause for the Agency to revisit the market values of track materials laid out in a final decision, it could induce a climate in which parties might attempt to use litigation and section 32 of the CTA as a means to capture the benefit of market price changes. That would be contrary to the intent of Division V of the CTA for a timely and orderly transfer or discontinuance process for railway lines.
[19] The Agency concludes that the fact that legal challenges were initiated that prevented or delayed the parties from completing their negotiations is not sufficient reason for the Agency to revisit its final determinations, despite the normal and expected fluctuations in the market price of salvaged rail and other assets that may have occurred in the interim.
[20] The Agency therefore denies the request to re-evaluate the value of the track materials under section 32 of the CTA.
II. Request from Bengough that the value of the land comprising the Radville Subdivision be included in the Agency's redetermination.
[21] In the original proceeding, CP and Bengough did not agree on the value of the Radville Subdivision lands. To assist in its reconciliation of the two value estimates, the Agency, in its interim decisions, directed Bengough, as well as Souris Valley, to advise if they wished the Agency to proceed to engage an independent land appraiser so that the final determination could be completed.
[22] Bengough responded that it believed through further discussions a fair land value might be set between the parties involved, and therefore, did not wish to proceed with a land appraisal of the railway line. After being advised of this by Bengough, the applicant, the Agency, pursuant to its power under subsection 27(4) of the CTA, permitted Bengough's application to be amended and to be dealt with as an application for a determination of NSV of the railway line excluding an assessment of land value. In Decision No. 378-R-2008, the Agency issued a final NSV determination on the Radville subdivision that did not include a land value.
[23] In its June 18, 2010 submission, Bengough requests that the Agency include land value in its redetermination, based on information already filed by the parties, as the Agency did for Souris Valley in Decision No. 385-R-2008, by relying on municipal tax records as a suitable indicator of land values.
[24] CP did not address the issue of land value in the context of valuing the land comprising the Radville subdivision for NSV purposes.
Analysis and determination
[25] In both the original Bengough and Souris Valley cases, the Agency determined that an independent land appraisal was necessary.
[26] Despite this, Bengough advised the Agency that it did not want the Agency to proceed with an independent appraisal of the land value. Accordingly, the Agency issued its final determination on the basis that Bengough's application was considered amended to be an application for the Agency to determine the NSV of the Radville Subdivision, excluding an assessment of land value. The Agency does not find it reasonable that Bengough now be granted a request that would effectively reverse that amendment, in particular given that the power of the Agency to issue an NSV without land valuation under section 146.3 was raised in the cross-appeal and was dismissed by the FCA.
[27] The Agency has been directed to reconsider one specific issue identified by the FCA, pertaining to the relevancy to a determination of NSV of the costs associated with the levelling of the right of way. Bengough's request for a land valuation does not fall within that purview, and will not be addressed.
[28] The Agency took a different approach in the original Bengough case than it did for Souris Valley because the circumstances were different. There was a larger differential in the proposed value of the land between the parties and a greater overall land value. These circumstances have not changed. The fact that the applicant is now questioning the appropriateness of the position or decision it took previously, i.e., not to have land value assessed, is not sufficient reason to revisit the matter.
[29] The Agency therefore denies Bengough's request that the Agency include a valuation of the land in its redetermination of the NSV under Section 32 of the CTA.
III. Request from Souris Valley (and Bengough) that the Agency revalue the land comprising the subdivisions
Positions of the Parties
[30] Souris Valley requested in its final submission of July 19, 2010 that the value of the land on the Bromhead Subdivision be redetermined. In the original NSV proceeding, Souris Valley submitted land values of $185 per acre for pasture land and $238 per acre for cultivated land. In its submission for the current proceeding, Souris Valley submits land values of $10 per title, or alternatively $100 per acre. This is based on an identical submission by Bengough, which bases its valuation on a land value of $10 per parcel submitted by CP to the Saskatchewan Land Registry, in connection with applications CP made in 2007 to amend the title to certain parcels of land relating to a previously discontinued portion of the Radville Subdivision (Bengough to Willow Bunch).
[31] CP discusses current land values in the context of its arguments pertaining to the levelling of the right of way. In that regard, it contends that the value of the right of way has increased by a minimum of 200 percent, and the value of the station grounds by 30-50 percent from the amounts claimed in its January 2008 submissions.
Analysis and determinations
[32] Souris Valley bases its request for a revaluation of the land on evidence submitted July 18, 2010, pertaining to amendments filed by CP with the Saskatchewan Land Registry in 2007. These amendments are dated February 7, 2007, pre-dating the original NSV application made by Souris Valley on November 9, 2007.
[33] Although Souris Valley does not cite a legislative reference for this request for revaluation, the Agency can consider it only in the context of section 32 of the CTA. Therefore, as the evidence now filed by Souris Valley was available to it at the time the submissions on land value were made in the original proceeding, the Agency concludes that there are no new facts or circumstances that could not have been brought forward to the Agency at that time, and Souris Valley's request for a review of the land value is denied.
[34] For the same reasons, and for the reasons given above not to include the land value in the NSV application made by Bengough, the Agency will not address the request from and evidence submitted by Bengough regarding land values, and also denies Bengough's request for a review of the land value.
Issue
[35] In accordance with the directions of the Federal Court in 2010FCA80 and 2010FCA81, the Agency is considering the issue of whether the costs claimed for the levelling of the rights of way are relevant to the NSV determinations for CP's Bromhead and Radville Subdivisions, and if so, what amount should be incorporated into the NSV determination for each of the subdivisions.
Positions of the parties
[36] The Municipalities consider that a determination of NSV must, as held by the FCA, presume the eventual discontinuance and even dismantling of the railway line. Further, they consider that this should include a level right of way in which the rail bed is cut and levelled and the ditches filled to the level of the adjacent properties, with the ballast being either removed or disposed of on-site by burying. They also consider that the most likely uses of the right of way other than as a transportation corridor must be taken into account.
[37] They are of the opinion that as the NSV process is speculative in nature, the legal obligation arising from the municipal by-law of the future owner of the right of way to level and reclaim the right of way is a relevant liability in the NSV determination process and is not altered by the FCA decision.
[38] CP submits that as a railway line is being offered to governments for "any purpose" under section 145 of the CTA, it cannot be assumed that the line will have only one purpose, that of cultivated farmland, as claimed by the Municipalities. As the cost of levelling in the current cases is relevant only to that one purpose, which is only one of many potential purposes, CP contends that it is inappropriate to consider any additional costs with respect to levelling.
[39] CP views levelling, not as a cost deducted from the value of an asset, but as an improvement that factors into the value of the land. CP submits that if the cost of levelling were deducted from the value, it would need to be considered if there was a corresponding increase in the land value to reflect the change of state. CP argues that it is inappropriate to first reduce the market value of the right of way to reflect its state with a roadbed and then reduce the asset value again for levelling costs, when it is unclear what the use of the right of way will be.
[40] In response to CP's position on this question, the Municipalities submit that it cannot be assumed that two adjustments should not be applied, one for the cost of levelling and a second for the lower productivity of the soil that is the result of years of soil compaction and industrial use.
[41] CP further submits that it cannot be presumed that levelling is inevitable or even likely, as it is not aware of any provincial or other railway companies in Saskatchewan that have been required to level their right of ways upon discontinuance of their operations.
[42] CP submits that, given that the eventual need to level the right of way is unlikely, based on the wide range of uses that the sale of a railway line for "any purpose" could encompass, and that the market value of the right of way is based on the existing condition of the lands, including the roadbed, no levelling costs should be assumed in NSV cases, including these instances.
Potential future use
[43] The Municipalities submit that as an assembled corridor through rural areas, the right of way is not suitable for any other use on a stand-alone basis, and suggest that the only alternative uses of the right of way are those consistent with the existing uses of adjacent land, with the adjacent land owners being the only potential alternative purchasers.
[44] The Municipalities cite Decision No. 542-R-2000 dated August 17, 2000, (pertaining to the NSV of CN's Cudworth Subdivision, in the province of Saskatchewan) as recognizing that there is little demand for commercial or other uses where the railway line runs through undeveloped farm and pasture land and that such right of way parcels have little alternative use beyond being combined with adjoining land parcels.
[45] CP strongly disagrees and considers incorrect the Municipalities' assertions that the future owners of a right of way will inevitably have to level and reclaim the property, that an assembled corridor in a rural area is not suitable for any other use on a stand-alone basis and that the only alternative purchasers are the adjacent landowners who would use the land for pasture and farming operations.
[46] CP indicates that in its experience, the sale of a railway line "for any purpose" encompasses a wide variety of uses such as railway operations, including short-line freight and tourist operations, as well as car storage; utility corridors, including water and sewer lines, oil and gas lines and telecommunications lines (including fibre); and, recreational trails. CP also considers ballast and road bed materials to be a valuable commodity that can be easily marketed and sold by anyone acquiring a railway line. CP adds that former station grounds can provide prime commercial and industrial property for smaller communities.
[47] CP considers that new developments in the process of extracting oil and gas deposits from the Bakken oil field, which lies under southeastern Saskatchewan and encompasses both subdivisions, present numerous new opportunities for railway corridors in that area to be used for rail transportation of petroleum products, pipelines and storage facilities, oil field access corridors and other related purposes. It submits that it is unlikely that land with the potential for commercial or development purposes in the Bakken area would be put through the unnecessary expense of being levelled for the purpose of pasture or cultivated farm land.
[48] With respect to CP's assertion that ballast and road bed materials have marketable value for a purchaser, the Municipalities submit that gravel is cheaply and widely available, and that there is no economic sense in reclaiming ballast from the subdivisions. Referring to the Saskatchewan short line railway company cited in the pleadings as an example by CP of a purchaser capitalizing on ballast and road bed materials by removing and selling them, the Municipalities indicate that it costs this short line operator $6.25 per cubic yard to have the ballast removed and delivered to purchasers within a 15 mile radius.
Marketability
[49] Recognizing that CP has not typically levelled or reclaimed its abandoned rights of way in Saskatchewan, the Municipalities consider that this explains why CP has for the most part been unsuccessful in finding buyers for these lands. They state that unreclaimed abandoned rights of way have no value to adjoining landowners unless they can be incorporated into the use of the adjoining land, which is precluded by their normally unreclaimed condition.
[50] To refute this, CP submits evidence of seven past and current sales, from 2005 onwards, of right of way lands in Saskatchewan, Manitoba and Alberta, some taking place during the discontinuance process, others after the process was complete, some with track infrastructure fully or partially intact, others with it removed, all sold on an "as is, where is" basis, and none with levelling required or undertaken.
[51] CP contends that this sales information further supports its position as to potential uses for these lands, demonstrating sales for use by Provinces as continuous corridors, for use by third parties for continued railway operations, for use by regional and municipal governments as recreational trails and pathways, for underground utility services, and rail car storage, as well as to private property owners for unspecified uses.
[52] In response, the Municipalities submit that CP is still the registered owner of several of its abandoned railway lines in the province of Saskatchewan, of which there are three in the area of the Bakken oil field. The Municipalities argue that this supports their position that demand is very limited in Saskatchewan for abandoned right of way lands on an "as is, where is" basis, that corridor transactions are the exception rather than the rule and that CP has been unable to sell most of its abandoned rights of way in Saskatchewan. The Municipalities maintain that levelling is required for the right of way lands to be marketable at all.
Environmental considerations
[53] CP points out that its rights of way have been in place for over 100 years in many regions and have developed their own ecosystems, becoming to a large degree natural wildlife refuges due to lack of tillage and limited herbicide application. It submits that many right of way ditches contain drainage courses, marshlands, prairie wetlands, rare native grasses and other vegetation, which provide important habitat for wildlife, migratory birds and other species, the destruction of which is prohibited by environmental requirements.
[54] CP indicates that the Saskatchewan Watershed Authority is a provincial agency that ensures wetlands in Saskatchewan are preserved and not filled in through agricultural and other activities. CP considers that it would be necessary to conduct specific environmental surveys of the lands, their features and their wildlife before any determination could be made regarding portions that would even be eligible for levelling from this perspective.
[55] The Municipalities respond by stating that no evidence has been submitted to support a conclusion that the rail beds in either the Bromhead or the Radville Subdivisions constitute, or are an essential support to, any sensitive ecosystem. Further they state that neither the Saskatchewan Watershed Authority Act, Statutes of Saskatchewan, Chapter D-33.1 nor the Drainage Control Regulations, continued under that Act contain a general requirement for "specific environmental surveys of lands" prior to the alteration of drainage works.
Analysis and determination
[56] The FCA has directed the Agency to specifically consider the question of the relevance of the costs associated with levelling the rights of way to NSV in these cases. In doing so, the Agency is mindful that any decision taken with respect to this question in these cases could reasonably be expected to apply to any future cases. So the Agency must also consider the issue as a generality, as well as determining if there is anything in this regard that sets these railway lines apart from any others.
[57] The FCA makes reference to the speculative nature of an NSV determination. It is speculative in that, in making an NSV determination the Agency estimates what fair and reasonable net value could be realized for the assets on a railway line, should a transfer of ownership of the railway line not occur, and the railway company were in a position to dispose of the assets in a manner of its choosing. For applications pursuant to "offers to government", the Agency must also determine NSV on the basis that the railway line could be used for any purpose.
[58] The Agency notes that in practice when railway companies dismantle railway lines, for the most part, they are dismantled by contractors and the requirements stipulated in the dismantling contracts are specific to the railway line. It is the railway companies' practice not to remove large bridges. Culverts are not normally removed or backfilled unless they are not functioning properly. Ballast is left in place and graded so that the ballast surface is flat. When the Agency is conducting market research in respect of removal and salvaging costs, this levelling of the ballast section of the rail bed is considered to be included in those costs. Typically, other than leaving the ballast surface in a flat, hazard-free condition, railway companies leave the rail bed and the right of way in an ‘as is, where is' condition after salvaging the track materials from a discontinued line, irrespective of any regulatory intervention from the Agency. There is no federal law requiring railway companies to level a right of way upon discontinuance of a railway line and the cost of levelling the right of way is not a salvaging cost that railway companies usually incur.
[59] Accordingly, in the course of making NSV determinations over a period of many years and under more than one legislative regime, the Agency has thus far not assumed, as a matter of general practice, that railway companies would be levelling the right of way to maximize the residual value of their assets upon discontinuance of a railway line. In determining land values for NSV purposes, the Agency takes the ‘as is, where is' condition of the rights of way and rail beds into consideration.
[60] This has been reflected in previous Agency determinations of land value and any discount to "across the fence" market values that it considered appropriate to apply. It has also been reflected in the Agency's treatment of leases and agreements that are considered likely to survive the discontinuance of the line. Many of these agreements are related to fibre optic cables, underground wires, pipelines or other such facilities, which are located along and/or across the right of way. The continuation of these leases and agreements is contingent on the continued ‘as is, where is' presence of the rights of way to accommodate the installations.
Potential future use
[61] The Municipalities base their arguments in favour of levelling the right of way on what they consider to be the most likely future use of the railway lands; that of arable, cultivated farm land or pasture land. CP, on the other hand, argues the possibility of many different potential future uses.
[62] Evidence has been provided demonstrating the sale of such railway lines for use as transportation and utility corridors and recreational trails. Evidence has also been provided attesting to railway companies retaining ownership of abandoned lines. There was no evidence submitted supporting the sale of railway lands for "across the fence" purposes, and it therefore appears that the parcel by parcel purchase by adjacent landowners may not, in fact, be the most likely use.
[63] Nevertheless, it should be noted that under sections 145 and 146.3 of the CTA, the Agency is not charged with assessing the most likely use of these lands, but rather with determining the NSV of a discontinued railway line to be used for any purpose. In the context of this responsibility, the Agency considers it reasonable to allow the speculative exercise of determining NSV to go no further than the point at which a railway line is left in a state suitable to accommodate the cost- effective implementation of the widest range of possible uses. To determine the point at which that occurs, the Agency examined the possible financial consequences of the differing degrees of reclamation advocated by the parties, as they relate to the potential future uses of a railway line.
[64] If a railway right of way is levelled in the way suggested by the Municipalities, (i.e., road bed cut and levelled and the ditches filled to the level of the adjacent properties, with the ballast being either removed or disposed of on-site by burying), the options of an alternative transportation service (rail or non-rail), a trail, a utility corridor, or of continued operation would be extinguished without significant investment to replace the rail bed, as would be the potential for any increased economic development that is dependent on such a transportation link. Based on the current estimated cost to prepare a rail bed, of approximately $50,000 - $75,000 per mile, depending on the terrainNote 1, (i.e., excavation or backfilling to proposed level, compaction and accommodation of existing surface drainage), the Agency is of the opinion that the cost to recreate a rail bed would, in most cases, be prohibitive.
[65] If the salvage process is considered complete upon the removal of the track materials and the levelling of the surface of the ballast section of the rail bed to a level, hazard-free condition, what would remain is the right of way; an approximately 100 ft. wide strip of land, with a rail bed that has the top of the ballast section levelled off running through the middleNote 2. This state would accommodate the potential uses outlined in the previous paragraph without the cost required to recreate a rail bed. However, in order to complete the analysis, it is necessary to examine what would be required in this scenario, in the event the potential future use required removal of the ballast.
[66] The parties have argued whether this state constitutes a liability or an opportunity for a potential purchaser, both making reference to a short line railway company who purchased a discontinued railway line with the track infrastructure already removed from a portion of the line, and who, according to the parties, is contracting the removal of the ballast materials from that portion and selling them.
[67] The Agency views recovered ballast as a marketable commodity. In the example given above of the Saskatchewan short line operator, the Municipalities submit that ballast is being removed at a cost of $6.25 per cubic yard. Neither party submits a selling price for this material, but Agency researchNote 3 indicates that railway ballast is worth approximately $8.75 per ton, or $15.75 per cubic yard (based on 1.8 tons/cubic yard). Even discounting the difference between the removal cost and the value of the ballast to take the less than clean state of the used material into account, and not factoring in any value for the scrap steel occasionally found within the material, it seems reasonable to conclude that if the future use required removal of the ballast it could be accomplished without undue financial hardship.
[68] The Agency concludes, and has consistently concluded in the past, that salvaging a railway line only to the point where the rail bed, including ballast, is left intact and in a safe condition allows the greatest flexibility when it comes to its cost-effective adaptability to the widest range of possible future uses.
Marketability
[69] Marketability is another reason advanced by the Municipalities as to why the rights of way should be levelled. In their opinion rail bed levelling is necessary for abandoned right of way lands to be at all marketable. They support this reasoning with evidence that CP is still the registered owner of several abandoned railway corridors in Saskatchewan.
[70] In this regard, the Agency finds that without an examination of what CP's efforts, intentions, and long-term plans are with respect to its ownership of these lands, it cannot be assumed that CP is the unwilling owner of unmarketable lands. The Agency also notes that whether or not a railway company ever disposes of its property subsequent to discontinuance is not relevant to a determination of NSV.
Environmental considerations
[71] With reference to environmental considerations, CP submits that it considers specific environmental surveys of the lands, their features and their wildlife necessary before any decision could be made regarding portions of the subdivisions that would be eligible for levelling from this perspective, citing the Saskatchewan Watershed Authority as the provincial body responsible for the preservation and stewardship of Saskatchewan wetlands. The Municipalities argue that such surveys are not within the mandate or enabling legislation of the Saskatchewan Watershed Authority and that CP has submitted no evidence to support a conclusion that the subdivisions constitute or support any sensitive ecosystems.
[72] In general terms, railway lines have been in place for many years, in many cases, including the ones at hand, approximately 100 years. As water courses have adapted to the right of way over that time, disturbing a right of way could modify a drainage pattern that has existed since the construction of a railway line and levelling a right of way could result in major flooding of adjacent land. The Agency agrees that this is a factor that should be considered before any wholesale right of way levelling takes place.
[73] With specific reference to these Subdivisions, a very cursory examination of the Saskatchewan Watershed Authority Act and the Drainage Control Regulations referenced by the Municipalities indicates that, under those authorities, as a railway company, CP may be exempt from the requirement to obtain approval prior to undertaking such work, but could be subject to formal complaint and investigation if other persons consider themselves adversely affected after the fact. It would seem prudent therefore for CP to mitigate such risk by thoroughly assessing the situation before taking any action.
Conclusion
[74] In consideration of all of the above, the Agency determines that, in general terms, costs associated with the levelling of the right of way are not relevant to the determination of an NSV pursuant to section 145 of the CTA.
[75] Further, the Agency can identify nothing with respect to the railway lines involved in the current cases that sets them apart from any other railway line in this regard. Consequently, the Agency will not undertake any further analysis of the costs claimed by the Municipalities for the levelling of the rights of way.
[76] The Agency concludes that, insofar as the levelling of the surface of the rail bed is a reasonable cost related to dismantling a railway line, it is already included in the removal, salvage and transportation costs that form part of an NSV determination.
[77] Accordingly, in light of the cost of removal and salvage of the track assets ($2,132,400 for the Radville Subdivision and $1,274,018 for the Bromhead Subdivision) already determined by the Agency, which includes the cost of grading and smoothing the rail bed after removal of the track assets, no additional costs will be included for the levelling of the rights of way as claimed by the Municipalities in the present instance for the subdivisions.
[78] The final NSV set out in Decision No. 378-R-2008 for the Radville Subdivision, and the final NSV set out in Decision No. 385-R-2008 for the Bromhead Subdivision are reconfirmed and not changed.
[79] Pursuant to subsection 146.3(3) of the CTA, the time available to Bengough and Souris Valley to accept CP's offer expires on the day that is 30 days after the date of this determination.
Members
- Geoffrey C. Hare
- John Scott
Appendix A
Legislative References
The following references are from the Canada Transportation Act
Subsection 27(4):
The Agency may, on terms or otherwise, make or allow any amendments in any proceedings before it.
Section 32:
The Agency may review, rescind or vary any decision or order made by it or may re-hear any application before deciding it if, in the opinion of the Agency, since the decision or order or the hearing of the application, there has been a change in the facts or circumstances pertaining to the decision, order or hearing.
Section 145:
(1) The railway company shall offer to transfer all of its interest in the railway line to the governments and urban transit authorities mentioned in this section for not more than its net salvage value to be used for any purpose if
(a) no person makes their interest known to the railway company, or no agreement with an interested person is reached within the required times; or
(b) an agreement is reached within the required time, but the transfer is not completed in accordance with the agreement.
(2) After the requirement to make an offer arises, the railway company shall send it simultaneously
(a) to the Minister if the railway line passes through
(i) more than one province or outside Canada,
(ii) land that is or was a reserve, as defined in subsection 2(1) of the Indian Act,
(iii) land that is the subject of an agreement entered into by the railway company and Minister for the settlement of aboriginal land claims, or
(iv) a metropolitan area;
(b) to the minister responsible for transportation matters in the government of each province through which the railway line passes;
(c) to the chairperson of every urban transit authority through whose territory the railway line passes; and
(d) to the clerk or other senior administrative officer of every municipal or district government through whose territory the railway line passes.
(3) Subject to subsection 146.3(3), after the offer is received
(a) by the Minister, the Government of Canada may accept it within thirty days;
(b) by a provincial minister, the government of the province may accept it within thirty days, unless the offer is received by the Minister, in which case the government of each province may accept it within an additional thirty days after the end of the period mentioned in paragraph (a) if it is not accepted under that paragraph;
(b.1) by an urban transit authority, it may accept it within an additional 30 days after the end of the period or periods for acceptance under paragraphs (a) and (b), if it is not accepted under those paragraphs; and
(c) by a municipal or district government, it may accept it within an additional 30 days after the end of the period or periods for acceptance under paragraphs (a), (b) and (b.1), if it is not accepted under those paragraphs.
(4) Once a government or an urban transit authority communicates its written acceptance of the offer to the railway company, the right of any other government or urban transit authority to accept the offer is extinguished, and the railway company must notify the other governments and urban transit authorities of the acceptance.
(5) If a government or an urban transit authority accepts the offer, but cannot agree with the railway company on the net salvage value within 90 days after the acceptance, the Agency may, on the application of the government or urban transit authority or the railway company, determine the net salvage value.
Section 146.3
- A person to whom a railway line is offered under section 145, or to whom a siding or spur is offered under section 146.2, may apply to the Agency for a determination of the net salvage value of the railway line, siding or spur, as the case may be, at any time before the expiry of the period available to the person to accept the offer.
- The applicant shall without delay provide a copy of the application to the railway company and the railway company shall without delay notify every other person to whom the offer was made and whose time to accept the offer has not expired that an application for a determination of the net salvage value was made.
- If an application is made under subsection (1), the time available to the applicant to accept the offer expires on the day that is 30 days after the day the Agency notifies the applicant of its determination of the net salvage value and the 30-day period for each other person to accept the offer is calculated on the expiry of the period available to the applicant to accept the offer.
- The applicant shall reimburse the Agency's costs associated with the application.
Notes
- Note 1
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Estimate provided by Agency Engineering staff.
- Note 2
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A right of way is usually level with the property adjacent to it where they abut each other and its borders are often indiscernible from the surrounding lands. Rail beds are approximately 10 to 12 feet wide and are comprised of a variety of substrates, including many different types of stone used for ballast. The grade at which rail beds are seated in a right of way varies from level with the right of way to up to several feet above it. Similarly, the topography of rights of way, as well as that of the abutting properties, can vary significantly from one railway line to another, and even from one portion of a given railway line to another portion of the same line.
- Note 3
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Natural Resources Canada: Canadian Minerals Yearbook, 2006; Mineral Aggregates, Table 1. Canada Stone Production, page 35.8
Member(s)
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