Decision No. 683-R-2002

December 20, 2002

File No. R 8005/S4

On December 12, 2002, Sydney Coal Railway Inc. (hereinafter SCR) and its wholly-owned subsidiary 3986250 Canada Inc. filed with the Agency (hereinafter the Agency) the application set out in the title.

In response to an application by SCR, the Agency issued Certificate of fitness No. 02003 and Decision No. 657-R-2002 dated December 11, 2002 permitting SCR, a wholly-owned subsidiary of Quebec Railway Corporation Inc. (hereinafter QRC), to operate a railway between the international pier on the waterfront in Sydney and the Lingan power generating plant, the rail lines through the coal storage facility at Victoria Junction, including the railway maintenance centre, and a portion of the Glace Bay rail line between the railway maintenance centre and the end of the Old Tank siding, Cape Breton Island, in the province of Nova Scotia.

SCR advised the Agency that the application for a variance is to reflect a change in circumstances where the rail assets would not be purchased or leased and the proposed operation would not be carried out by SCR but rather by its subsidiary 3986250 Canada Inc.

Paragraph 93(1)(c) of the Canada Transportation Act (hereinafter the CTA) states that the Agency may, on application, vary a certificate of fitness to reflect a change in railway operations or in circumstances relating to those operations.

Subsection 92(1) of the CTA requires that the Agency shall issue a certificate of fitness for the proposed operation of a railway if the Agency is satisfied that there will be adequate liability insurance coverage for the proposed operation, as determined in accordance with the Railway Third Party Liability Insurance Coverage Regulations, SOR 96-337.

Section 87 of the CTA provides, in part, that a "railway" means a railway within the legislative authority of Parliament.

In this case, the Agency notes that 3986250 Canada Inc. proposes to acquire and/or operate, through sale, lease or right of access, the railway which was formally owned and/or operated by 510845 N.B. Inc. pursuant to Certificate of fitness No. 02001 dated April 19, 2002. The Agency further notes that this railway was, by virtue of section 5 of the Cape Breton Development Corporation Divestiture Authorization and Dissolution Act, S.C. 2000, c. 23, declared to be a work for the general advantage of Canada.

As such, the Agency is satisfied that the railway subject to this application remains a railway declared to be a work for the general advantage of Canada and thus is a railway within the legislative authority of Parliament. Therefore, the Agency determines that 3986250 Canada Inc. is eligible to be considered for a certificate of fitness pursuant to section 92 of the CTA.

With respect to the insurance coverage adequacy, the Agency has reviewed the material filed and is satisfied that 3986250 Canada Inc. has adequate third party liability insurance coverage, including self-insurance, for the proposed railway operation.

The Agency's review of 3986250 Canada Inc. financial capability to self-insure for the amount of self-insured retention was based on financial information of QRC and the indemnity agreement between 3986250 Canada Inc. and QRC in respect of the amount of self-insurance.

The Agency also notes that 3986250 Canada Inc. proposes to commence the operation of its railway on January 1, 2003. Therefore, any certificate to issue would be effective on that date.

The Agency has considered the matter and in light of the acquisition of the railway company's assets by 3986250 Canada Inc. in lieu of SCR and in light of the changes in the proposed railway operations, the Agency will vary Certificate of fitness No. 02003 by changing the name and by reflecting the changes in the proposed operation.

Accordingly, pursuant to paragraph 93(1)(c) of the CTA, Certificate of fitness No. 02003 is hereby varied, effective January 1, 2003, by changing the name to read 3986250 Canada Inc. and to permit it to operate a railway between the international pier on the waterfront in Sydney and the Lingan power generating plant, the rail lines through the coal storage facility at Victoria Junction, including the railway maintenance centre, and a portion of the Glace Bay rail line between the railway maintenance centre and the end of the Old Tank siding, Cape Breton Island, in the province of Nova Scotia.

In light of the indemnity agreement, 3986250 Canada Inc. or QRC shall expeditiously notify the Agency of any incidents wherein the cumulative amount of self-insurance in excess of $250,000 has been paid out during the insurance contract term by any of the named insured included in the insurance contract. Furthermore, once the cumulative amount of self-insurance of $250,000 is exceeded, 3986250 Canada Inc. or QRC shall expeditiously notify the Agency of any incident resulting in a self-insurance pay out greater than $100,000. 3986250 Canada Inc. shall also provide to the Agency a copy of QRC's audited financial statements, on an annual basis.

Certificate of fitness No. 02003-1 which is issued pursuant to this Decision supersedes Certificate of fitness No. 02003 issued to Sydney Coal Railway Inc. on December 11, 2002.