Decision No. 48-R-1992

January 31, 1992

File No. T6100-4-3

INTRODUCTION

Pursuant to subsection 158(2) of the National Transportation Act, 1987, (hereinafter the NTA, 1987), the Napierville Junction Railway Company (hereinafter NJR) filed with the National Transportation Agency (hereinafter the Agency) a Notice of an agreement to lease its line of railway from Delson, Quebec to the International Border to the Atlantic and North West Railway Company (hereinafter A&NW). The Notice was received by the Agency on October 8, 1991.

NJR indicated in its Notice that it was incorporated pursuant to Statutes of Quebec, 51-52 Victoria, Chapter 99. It also noted that the Delaware and Hudson Railway Company (hereinafter D&H) purchased the issued and outstanding shares of NJR on April 9, 1907. On January 18, 1991, Canadian Pacific Limited (hereinafter CP) acquired, via its U.S. subsidiary the Delaware & Hudson Corporation (hereinafter D&H Corp.), the majority of the assets of D&H, including the aforementioned shares of NJR.

NJR noted that A&NW is a federally incorporated railway company, that CP currently owns 100 percent of the issued and outstanding shares of A&NW, and that A&NW is operated by CP Rail as part of its rail system. NJR submitted that the conveyance by lease of the subject line to A&NW has the effect of re-organizing the assets of NJR within the CP Rail system.

Public notice of the lease agreement was published on November 25, 1991 in the newspapers of the area concerned and copies of the notice were served to the shippers on the line and to others believed to be interested in this proceeding. The notice invited all persons who wished to present their views on the proposed conveyance to address themselves to matters of public interest or to the authority of the acquiring company to operate the subject line of railway. Written submissions were to be filed with the Agency within thirty (30) days from the date of publication of the notice.

Pursuant to subsection 158(3) of the NTA, 1987, the Agency shall, after holding such hearings, if any, as are required in its opinion to enable all persons who wish to do so to present their views on the conveyance of the line of railway or segment, approve the agreement for the conveyance, unless the Agency determines that the conveyance would not be in the public interest or that the company to whom the line or segment is to be conveyed is not authorized to operate it.

ANALYSIS

The Agency received two responses to the above-mentioned public notice. The Municipality of the Village of Lacolle requested additional information concerning the lease agreement which it received directly from NJR. The Municipality did not file a further submission with the Agency.

The Halifax - Dartmouth Port Development Commission (hereinafter the Commission) opposed the proposed lease agreement between NJR and A&NW as not being in the public interest because it "...would contribute to the continued diversion of significant amounts of Canadian traffic through U.S. ports to the detriment of the Canadian port/rail system, and will also limit transportation choices for all Canadian importers and exporters...". The Commission suggested that the Agency should hold hearings to consider this agreement and examine the "...serious negative impacts of the CP purchase of the D&H."

NJR contended that the Commission had not indicated how the lease agreement between NJR and A&NW would contribute to the continued traffic flow to and from U.S. ports or that the lease would not be in the public interest. NJR noted that the purchase of the assets of D&H by D&H Corp., an American subsidiary of CP, gave CP effective control over both D&H and NJR and that the integration of rail operations amongst NJR, D&H and CP was not dependent on the lease agreement. Further, NJR contended that the lease agreement was simply an internal transaction changing the form of control exercised by CP over NJR and providing for the movement of traffic without the necessity of an operating subsidiary. NJR expressed the opinion that the subject lease would not be a factor in the decisions of shipping lines concerning choices of ports of call.

FINDINGS

The Agency has considered all of the material received and on file and has determined that a public hearing is not necessary in this case and that a decision can be rendered based on the information on file.

The Agency finds that the Commission has not substantiated that the lease agreement is not in the public interest. The concerns of the Commission are related to the movement of traffic by CP over NJR and D&H Corp. rail system to and from U.S. ports. The Agency notes that the Commission had expressed these concerns when it raised the question of the jurisdiction of the Agency under section 158 of the NTA, 1987 with respect to the acquisition of D&H by D&H Corp. On February 14, 1991, the Agency informed the Commission that it had determined that neither CP nor its U.S. subsidiary was obligated under section 158 of the NTA, 1987 to seek approval of the sale of D&H assets to D&H Corp. The Agency notes, however, that the above transaction did result in CP having effective control of the operation of both D&H and NJR.

The Agency finds that no convincing evidence has been presented to indicate that approval of this lease agreement will have any impact on the current method of operation of NJR which would not be in the public interest.

Further, as A&NW is wholly owned by CP and operated by CP Rail, the Agency has determined that A&NW has the necessary authority under federal legislation to operate the NJR rail line.

CONCLUSION

Accordingly, pursuant to subsection 158(3) of the NTA, 1987, the Agency hereby approves the lease agreement between NJR and A&NW for the line of the NJR between Delson and the International Border in the Province of Quebec, including all branches and additions to the railway, all lands, stations, and other property.