Decision No. 54-R-1991
February 5, 1991
APPLICATION by the Canadian National Railway Company made pursuant to section 255 of the Railway Act, R.S.C., 1985, c. R-3, and deemed to have been made pursuant to section 160 of the National Transportation Act, 1987, R.S.C., 1985 c. 28 (3rd Supp.), for authority to abandon the operation of the segment of the Chandler Subdivision from Ste-Adélaïde (mileage 48.10) to Gaspé (mileage 104.23), a total distance of 56.13 miles, in the Province of Quebec.
File No. T6115/376
BACKGROUND INFORMATION
On April 2, 1986, the Canadian National Railway Company (hereinafter CN) applied to the Canadian Transport Commission, pursuant to section 255 of the Railway Act, for authority to abandon the operation of the above-noted segment (hereinafter the branch line).
Railway Transport Committee Order No. R-40439 dated March 24, 1987, ordered the operation of the branch line continued.
With the proclamation on January 1, 1988 of the National Transportation Act, 1987 (hereinafter the NTA, 1987), this application is now deemed to have been made pursuant to section 160 of the NTA, 1987. The National Transportation Agency (hereinafter the Agency) is now required to reconsider the application under section 171 of the NTA, 1987.
The Chandler Subdivision, between Gaspé and Paspébiac, was built by the Atlantic Quebec and Western Railway Company and opened for traffic between 1907 and 1912. In 1929, CN acquired The Atlantic Quebec and Western Railway Company.
The Chandler Subdivision is situated in the Gaspé area, along the border of the St. Lawrence River and Baie des Chaleurs. It begins at New Carlisle (mileage 0.0) and runs north-east to end at Gaspé (mileage 104.2). The segment of the Subdivision under review terminates at Ste-Adélaïde (mileage 48.10), situated slightly to the east of Chandler. Today, the branch line is in good to poor condition. A map of the area is attached as Appendix 1.
The segment of the Chandler Subdivision proposed for abandonment is currently served by a wayfreight operating as and when required from Chandler to Gaspé.
Rail service for freight in the direction of Montréal is available at Chandler (mileage 44.08) on the segment of the CN Chandler Subdivision that has not been proposed for abandonment. In addition, principal Highway No. 132 which is connected to a network of local roads closely parallels the entire length of the railway line.
At present, VIA Rail Canada Inc. (hereinafter VIA) operates a passenger train service between Gaspé and Montréal three times a week.
ACTUAL LOSS
The interim determination of the actual loss incurred in the operation of the branch line for the years 1986 through 1988 was published in the Notice of Reconsideration issued on November 21, 1989. This notice advertised the reconsideration of this abandonment application and solicited interventions from the general public pursuant to section 161 of the NTA, 1987. After submissions from all interested parties were considered, including the request of VIA which is referred to under the section entitled "Contribution of VIA", the Agency made a final determination of the actual losses to reflect the specific characteristics of the branch line in question. As a result, adjustments were made to the following items: roadway maintenance; property taxes; cost of capital on roadway property; and roadway depreciation. The final determination of the actual loss as determined by the Agency for each of the prescribed financial years is shown in the following table:
Year | Total Costs | Revenues | Actual Losses | Carloads |
$ | $ | $ | ||
1986 | 2,491,957 | 2,077,389 | 414,568 | 1,231 |
1987 | 1,510,844 | 1,186,553 | 324,291 | 508 |
1988 | 840,165 | 555,661 | 284,504 | 245 |
In performing its duties under paragraph 163(1)(c) of the NTA, 1987, the Agency must give public notice of the final determination of the actual losses incurred by CN in the operation of the branch line and of the principal factors applied in making that determination. The determination and the factors are attached as Appendix 2.
Both the interim and final "Actual Loss" are determined pursuant to the provisions of the Railway Costing Regulations, SOR/80-310 and section 157 of the NTA, 1987.
OPPOSITION TO THE PROPOSED ABANDONMENT
The Notice of Reconsideration gave the general public the opportunity to provide evidence to the Agency that the operation of the branch line is at present economic or that there is reason to believe that the operation of the branch line could become economic in the foreseeable future. A summary of the statements which were received by the Agency within the 60-day intervention period follows.
Ministère des Transports of the Province of Quebec
The ministère des Transports of the Province of Quebec expressed its concern with the reconsideration of the Chandler Subdivision, recognizing that insufficient transport services already exist in this remote area without the abandonment of the operation of the Subdivision under application. Specifically, the ministère des Transports of the Province of Quebec maintained that the progressive reduction of the essential rail services in this area is a result of many events, giving as an example the daily passenger service which was reduced to three times a week after January 15, 1990. It suggested that CN has adopted a segmentation policy in order to facilitate the abandonment of rail segments. The ministère des Transports of the Province of Quebec concluded that the Agency should cancel the reconsideration pursuant to section 41 of the NTA, 1987. The ministère des Transports of the Province of Quebec requested that a public hearing be held if the Agency does decide to continue the reconsideration of this case.
The Agency informed the ministère des Transports of the Province of Quebec that the Agency must rule on the abandonment applications which are presented to it. Specifically, in performing its duties under section 171 of the NTA, 1987, the Agency must reconsider every application for abandonment of the operation of a branch line within three years from the date the application was received. The Agency therefore denied the application for review made by the ministère des Transports of the Province of Quebec pursuant to section 41 of the NTA, 1987.
The ministère des Transports of the Province of Quebec claimed that Mines Gaspé will increase production considerably in 1990, which implies the possibility of resorting to the train once more. In addition, it noted that the continuance of the operation of the branch line is essential to the economic survival of this area, already insufficiently endowed with transportation services; and, more specifically, to the port of Gaspé, which cannot survive without the rail link to the economic centres of Montréal and Toronto. Another concern of the ministère des Transports of the Province of Quebec was how the revenues of VIA associated with the operation of its passenger service should be dealt with and whether or not they should be included as revenue for CN.
The ministère des Transports of the Province of Quebec asked that the Agency await the results of the study undertaken by its Minister concerning the basic rail network which was to have been made public shortly after its intervention was filed.
Ville de Gaspé
The Ville de Gaspé solicited more than ninety interventions in opposition from the area, from regional and county municipalities, municipal corporations, school organizations, chambers of commerce, economic development councils and from a series of other interveners. Almost all expressed, in general terms, the view that the branch line is essential to regional economic development. None offered traffic projections which would enable the Agency to foresee growth in the use of the branch line. Included with the submissions forwarded by the Ville de Gaspé to the Agency were those of three companies: Mines Gaspé, Solmer Marine Inc. and the Compagnie Gaspésia Limitée.
From 1986 to 1988, the majority of inbound and outbound carloads were related to the activity of Mines Gaspé. Located in Murdochville, Mines Gaspé transports inbound copper concentrates and outbound copper anodes. Although previously the major shipper on this branch line, Mines Gaspé now ships almost all of its products by truck, a more cost-effective means of transport. For this reason, Mines Gaspé refused to support the request of the Ville de Gaspé to file a submission with the Ville de Gaspé opposing the abandonment of the branch line in question. Mines Gaspé did not file an intervention directly with the Agency.
In response to the request made by the Ville de Gaspé, Solmer Marine Inc. expressed that its future usage of the branch line is completely conditional on the success of obtaining a contract to produce containers which was negotiated at the beginning of 1990. No indication of potential carload volume was given.
The statement filed by the third company with the Ville de Gaspé was from the Compagnie Gaspésia Limitée. It opposed the abandonment because it judged the branch line indispensable to freight traffic, to the economic development of the region as well as to passenger traffic. Again, no figures indicating the increase in freight traffic that would render the above-noted branch line economic were given.
The Ville de Gaspé and the ministère des Transports of the Province of Quebec indicated that CN ceased to make any marketing efforts to attract new clients or to retain existing clients.
Other Interventions
In addition, twenty-six submissions were received by the Agency from a broad spectrum of municipal and regional governments, agencies as well as a series of other interveners. These submissions stressed the importance to regional economic development of the continuation of both freight and passenger rail service in the area. Many requested the Agency to cancel the reconsideration of the application or to hold a public hearing to deal with the application. The majority of these interveners maintained that the Agency should not authorize the proposed abandonment, given that the area served by the branch line is already economically disadvantaged and is lacking in public transport.
None of the numerous public interest submissions provided evidence establishing that traffic on the branch would increase to the point of rendering the operation of the branch line economic in the future.
CONTRIBUTION OF VIA
VIA requested the Agency to include both the costs and revenues related to its operation of passenger services over the 56.13 mile segment of the Chandler Subdivision when determining the actual losses incurred by CN in operating the branch line. More precisely, VIA submitted that its net contribution, approximately $38,000 for 1989 and accrued by CN for the branch line over which it operates a passenger service under the provisions of the CN/VIA Rail Train Service Agreement (hereinafter the Agreement), should be included for 1989 and for the term of the Agreement owing to both the costs and revenues now being identifiable with its operations over the branch line. This Agreement went into effect on January 1, 1989. As a result of this submission, the Agency has considered the request of VIA as addressed in the following section.
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 this abandonment application. By letter dated September 17, 1990, the Agency granted CN and VIA two months from the date of that letter in which to conclude their discussions regarding the operation of VIA passenger service over the aforementioned branch line. On November 22, 1990, CN and VIA advised the Agency that it may resume its consideration of the said application. Findings from the examination of the Agency of this application follow.
The Agency is of the opinion that there is sufficient information on file to render a decision and that the holding of a public hearing would not bring forth any new information that would have a significant bearing on the consideration by the Agency of the matter. Therefore, all requests for a public hearing are hereby denied.
Almost all of the submissions filed with the Agency made reference to the passenger services of VIA, underscoring its importance to the inhabitants of the area that have access to its service. They conveyed the same view that VIA would cease its passenger services should the Agency grant the request for abandonment of the operation of the above-noted branch line.
However, it is important to note that paragraph 168(1)(a) of the NTA, 1987 states that where passenger service is operated by VIA on the branch line considered for abandonment, and it is determined that the operation of the branch line is to be abandoned, the Agency shall order the abandonment of the operation of the branch line one year from the date of the Order. During that period, VIA has to decide whether it will acquire the branch line or make other arrangements to continue or discontinue the service.
Furthermore, subsection 168(3) of the NTA, 1987 states that where a date for the abandonment of the operation of a branch line or segment has been fixed under paragraph 168(1)(a) of the NTA, 1987, VIA may, within six months after the date of the order, require the railway company that operates the branch line or segment to transfer it to VIA on the date fixed in return for the payment by VIA of such amount as is agreed to by VIA and the railway company or, where no such agreement is reached before that date, of the amount that represents the net salvage value of the branch line or segment.
Section 164 of the NTA, 1987 requires the Agency to determine if the operation of the branch line is economic or uneconomic, and whether there is a reasonable probability of its becoming economic in the foreseeable future. During the latest three years for which operational data are available, CN operated the branch line with actual losses averaging $341,121.
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.
On the basis of the evidence before it, given that opposition to the proposed abandonment, although voluminous, did not offer evidence to indicate that shippers would increase rail traffic or that the economic activity in the area would improve enough to generate an increase in traffic, the Agency has determined that the operation of the branch line is at present uneconomic and that there is no reasonable probability of its becoming economic in the foreseeable future.
The Agency, which has made these determinations in accordance with section 164 of the NTA, 1987, concludes pursuant to subsection 165(1) of the NTA, 1987 that the operation of the segment of the Chandler Subdivision from Ste-Adélaïde (mileage 48.10) to Gaspé (mileage 104.23) should be abandoned.
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