Decision No. 53-R-1991
February 5, 1991
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 the application by the Canadian National Railway Company, made pursuant to section 255 of the Railway Act, R.S.C., 1985, c. R-3, for authority to abandon the operation of the segment of the Smiths Falls Subdivision from a point near Richmond (mileage 13.00) to a point near Smiths Falls (mileage 34.05), a total distance of 21.05 miles, in the Province of Ontario.
File No. T6115/658
INTRODUCTION
On May 2, 1983, the Canadian National Railway Company (hereinafter CN) applied to the Railway Transport Committee (hereinafter the RTC) of the Canadian Transport Commission for authority to abandon the operation of the segment of the Smiths Falls Subdivision from a point near Richmond (mileage 13.00) to a point near Strathcona (mileage 99.30), in the Province of Ontario.
The operation of the segment of the Smiths Falls Subdivision from a point near Smiths Falls (mileage 34.05) to Strathcona (mileage 99.30), a distance of 65.25 miles, was abandoned in two stages subsequent to RTC Order Nos. R-36326, dated March 2, 1984, and R-39889, dated October 10, 1986. These two Orders also provided for the continued operation of the portion of the Subdivision between mileage 13.00 and mileage 34.05.
With the proclamation on January 1, 1988 of the National Transportation Act, 1987, R.S.C., 1985, c. 28 (3rd Supp.) (hereinafter the NTA, 1987), this application for authority to abandon the operation of the segment of the Smiths Falls Subdivision between Richmond (mileage 13.00) and a point near Smiths Falls (mileage 34.05) (hereinafter the branch line) must now be reconsidered pursuant to the provisions of section 171 of the NTA, 1987.
HISTORY OF THE BRANCH LINE
The branch line was constructed by the Canadian Northern Ontario Railway Company as part of a railway line from Richmond to Sydenham, Ontario which opened for traffic on December 30, 1913. This company became part of CN on May 17, 1956.
LOCATION OF THE BRANCH LINE
A map of the area is attached as Appendix 1. The Smiths Falls Subdivision is located in and to the southwest of Ottawa, Ontario. The Subdivision commences at Federal, at mileage 6.0 of the CN Beachburg Subdivision, in south Ottawa and runs southwestward to Smiths Falls East (mileage 34.05) where it connects with the Canadian Pacific Limited Brockville Subdivision.
CONDITION OF THE BRANCH LINE
The condition of the branch line varies from very good to good. In 1984, the branch line was upgraded at the expense of VIA Rail Canada Inc. (hereinafter VIA) to facilitate operation of passenger trains up to 95 miles per hour. New 115 pound per yard rail, crushed rock ballast and additional track, switch and bridge ties were installed on the branch line. The maximum permissible speed for freight train operations on the branch line is 60 miles per hour.
DESCRIPTION OF SERVICE
Freight train service between Richmond and Smiths Falls is provided on an "as and when required" basis by a roadswitcher operating from Ottawa.
In addition, VIA operates three passenger trains in each direction between Ottawa and Toronto over the Smiths Falls Subdivision, two on a daily basis and one daily except Sunday.
CARLOAD FREIGHT TRAFFIC
The volume of freight traffic handled on the branch line has been very limited during the prescribed financial years of 1986, 1987 and 1988. All of the traffic handled on the branch line during this period originated or terminated at Smiths Falls. The numbers of carloads carried are as follows:
CN Smiths Falls Subdivision
Richmond (mileage 13.00) to Smiths Falls (mileage 34.05)
1986 | 1987 | 1988 |
46* | 3 | 7 |
* 31 carloads were carried simultaneously for Three Buoys Houseboats
ACTUAL LOSSES INCURRED
In accordance with section 163 of the NTA, 1987, the Agency reviewed the statements of actual losses filed by CN in respect of the operation of the branch line during the prescribed financial years of 1986, 1987 and 1988 and, in a notice issued on November 30, 1989, the Agency published an interim determination of the amounts of the actual losses. The Agency has revised its interim determination to reflect recent changes in the method of developing net book investment levels and bridge traffic adjustments. The final determination of the amounts of the actual losses incurred by CN in the operation of the branch line, as determined by the Agency pursuant to the provisions of the Railway Costing Regulations, SOR/80-310, and section 157 of the NTA, 1987, reads as follows:
Final Determination of Actual Losses
Year | Costs | Revenues | Actual Loss |
$ | $ | $ | |
1986 | 185,363 | 209,571 | (24,208) |
1987 | 45,948 | 12,980 | 32,968 |
1988 | 59,270 | 20,232 | 39,038 |
More detailed cost information is contained in the Statements of Actual Loss which are attached as Appendix 2.
OPPOSITION TO THE PROPOSED ABANDONMENT
The Notice of Interim Actual Loss of the Agency invited anyone who wished to oppose the application or anyone who could provide documented evidence that there was a reasonable probability of the branch line becoming economic in the foreseeable future to file a written submission with the Agency setting forth their grounds for opposition or presenting that evidence. The Agency received submissions from VIA and Mr. W.H. LeSurf, Councillor, of the Town of Smiths Falls.
The position of VIA was that due to the implementation of a new train service agreement between CN and VIA effective January 1, 1989, there was an excess of CN revenues over CN variable costs associated with the operation of VIA Ottawa-Toronto passenger train service in 1989 over the branch line. VIA submitted that this contribution exceeded the Agency 1988 interim actual loss determination even if the costs disallowed by the Agency were included. VIA further submitted that if the costs and revenues associated with its traffic over the branch line were considered in the determination of actual loss, the operation of the branch line would be economic or have a reasonable probability of becoming economic as of the year 1989.
The submission of Mr. LeSurf made reference to the importance of VIA to Canada and also indicated that CN made freight traffic uneconomical by cutting itself off from direct connections and discouraging development.
MATTERS CONSIDERED AND FINDINGS
On July 16, 1990, CN, in conjunction with VIA, filed an application with the Agency pursuant to section 34 of the National Transportation Agency General Rules, SOR/88-23, for an adjournment of the above-cited application. By letter dated September 17, 1990, the Agency granted CN and VIA two months from the date of that letter to allow them time to conclude their discussions regarding the operations of VIA over the aforementioned branch line. On November 22, 1990, CN and VIA advised the Agency that it could resume its reconsideration of the application.
The Agency has determined that a public hearing is not necessary and a decision on this application can be made based on the evidence received and on file.
Section 164 of the NTA, 1987 requires the Agency to determine if the operation of a branch line is economic or uneconomic, and whether there is a reasonable probability of that branch line becoming economic in the foreseeable future. The final determination of the amounts of the actual losses has been referred to earlier in this Decision. This determination indicates that the operation of the branch line is presently uneconomic.
Subsection 165(1) of the NTA, 1987 requires the Agency to order the abandonment of the operation of a branch line should the Agency find that its operation is uneconomic and that there is no reasonable probability of its becoming economic in the foreseeable future. In analyzing the costs incurred in operating the branch line from 1986 to 1988, it is evident that CN has continued to incur actual losses. From the two submissions received there was no indication that sufficient carload traffic would be generated on the branch line which would make its operation economic in the foreseeable future.
With reference to the request of VIA to include in the determinations of actual loss and economic viability of the branch line its estimates of CN costs and revenues, which VIA submits are associated with its traffic, the Agency finds that these costs and revenues are not specific to the operation of the branch line. The costs and revenues identified by VIA are based on CN system average costs and are related to the gross ton miles and train miles generated by VIA trains on the CN rail network. The Agency considers that the allocation of such costs and revenues on this basis is not representative of a specific VIA service over a specific branch line. Therefore, the costs and revenues submitted by VIA have not been included in the determinations of actual loss and economic viability for the purposes of sections 163 and 164 of the NTA, 1987. Accordingly, the Agency hereby denies the request made by VIA.
Accordingly, after consideration of all the evidence before it, the Agency hereby determines that there is no reasonable probability of the operation of the branch line becoming economic in the foreseeable future.
Therefore, in compliance with subsection 165(1) of the NTA, 1987, the Agency must conclude that the operation of the segment of the Smiths Falls Subdivision from Richmond (mileage 13.00) to a point near Smiths Falls (mileage 34.05) must be abandoned.
Section 168 of the NTA, 1987 governs the time limits within which the Agency must order the abandonment of the operation of a branch line. Paragraph 168(1)(a) applies in cases where a passenger service also exists on the branch line. It states as follows:
(1) Where the Agency makes an order under section 162, 165, 166 or 175 for the abandonment of the operation of a branch line or segment thereof, it shall fix
(a) the date that is one year after the date of the order as the date for the abandonment, where VIA Rail Canada Inc. operates a passenger service on the branch line or segment or the branch line or segment is identified in a plan of VIA Rail Canada Inc., approved by the Governor in Council, for the proposed development or expansion of its passenger service as being required for the implementation of the plan;
Accordingly, the Agency orders that the operation of the branch line must be abandoned one year from the date of the Order giving effect to this Decision.
Furthermore, in their letter dated November 22, 1990, CN and VIA advised the Agency that, should the proposed abandonment be approved, VIA would require the transfer of the branch line pursuant to subsection 168(3) of the NTA, 1987 and CN would transfer the branch line on terms and conditions already agreed upon.
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