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Closure of short-line railway would be “dramatic” for northeastern Ontario sawmill

Transportation options few for EACOM's Nairn Centre mill if Genesee & Wyoming pulls rail service
The Huron Central line runs right through EACOM Timber’s sawmill property in Nairn Centre.

EACOM Timber is prepared to pull out all the stops to keep its Nairn Centre sawmill running even if rail freight service is discontinued between Sault Ste. Marie and Sudbury.

Christine Leduc, director of public affairs for the Montreal-based forest products company, admitted that would be a difficult task since the mill has no other rail alternatives and trucking capacity in the northeast is very limited.

“Not only is that rail critical for us, because it brings logs into the mill, it helps bring product to market.”

Genesee & Wyoming Canada, the parent company of the Huron Central Railway, announced May 22 that it intends to discontinue operations on the 283-kilometre line at year's end.

Reminiscent of the railway’s closure threats in 2009, the carrier is again in financial straits, blaming Queen’s Park and Ottawa for not coming through with $43.2 million in subsidies for track maintenance and federally-mandated safety upgrades.

The company said in a news release that its application for $23.1 million from the National Trade Corridors Fund was rejected by Transport Canada.

Discussions with the provincial government to secure matching funds appear to have gone nowhere, though the Northern Ontario Heritage Fund recently provided the railway with $882,650 for track and crossing upgrades.

The track is owned by Canadian Pacific Railway. Montreal’s Genesee & Wyoming Canada is contracted to service industrial shippers on the line and round up regional freight for CP.

Genesee & Wyoming president Louis Gravel has not been available for comment.

Leduc said EACOM is monitoring the situation because the potential impact to the Nairn Centre operation and its 185 employees could be “significant.”

The sawmill is 55 kilometres west of Sudbury on the Trans-Canada Highway. The Huron Central line, which actually runs through the mill, interchanges with the Canadian Pacific in Sudbury.

Leduc pivoted away from a question if the Nairn Centre sawmill would remain operational if no rail service were to exist.

“The company would do everything to find solutions,” she said.

“We would fight to keep Nairn Centre performing and operational even through a Huron Central closure. But it would not be easy and that would be devastating.”

The potential for a strike by Canadian Pacific conductors and locomotive engineers in late May poses a more immediate headache.

EACOM, which employs 770 in Northern Ontario, has other sawmills in Ear Falls, Timmins, Gogama, Elk Lake, and an engineered I-joist plant in Sault Ste. Marie.

As one of three major shippers on that line, along with Domtar in Espanola and Essar Steel Algoma in Sault Ste. Marie, Leduc said they’ve not received a stop-service date from Genesee & Wyoming.

“Even if there were a serious closure notice, for us, it would be dramatic and we would have to move into a crisis situation where our logistics team…would have to come up with alternative ways of bringing our product to market. We know there’s not really too many alternatives.”

The rail issue EACOM faces is a really national challenge involving other industry sectors when it comes to rail car availability.

“We’re in a situation where we will place orders for rail cars and we may even get less than half of what we ordered," said Leduc.

The sawmilling sector is experiencing record-high lumber prices while in the midst of a trade war with the U.S.

Leduc said government has a role to play because forest product companies can’t have shipments delayed, inventories building up and kept from reaching market due to infrastructure constraints.

“We’re almost at a bit of a crisis at this point,” she said, “and the problem is exacerbated by the fact that it’s not that easy to recruit truck drivers. They’re retiring at a much quicker rate than we are recruiting.”

According to the Canadian Trucking Alliance, 10,000 truck drivers retire every year with the industry struggling to replace them.

Leduc said some people may question why industrial shippers, who benefit from rail service, don’t contribute to the upkeep of the track.

She responds that EACOM already pays competitive fees to the Crown and its revenues should be reinvested into its operations, not into the maintenance of a railway.

“For the taxpayer, there’s a much bigger benefit to the province from having those industries in the North that are competitive than to pull up the rail and have these industries not be competitive.”

One argument to invest public funds in the Huron Central, she added, is that the alternative means putting more trucks on the road, which would be much worse for the environment and cause more wear and tear on highways.

“But where would we even get more trucks?”

Leduc refrained from commenting on Genesee & Wyoming’s decision to make a closure announcement in the middle of a provincial election, mentioning the anxiety it causes for the Nairn Centre workforce.

But the campaign, she said, at least gets the political leaders talking about opportunities and infrastructure spending in the North.

“Those kinds of commitments from all three parties create some space for a new conversation on resource development in the North and what it could mean for communities. This infrastructure piece is just one of those.

“I’m certainly hopeful. I don’t believe that Ontario would allow such an important railway to close.”

As for the status of Genesee & Wyoming’s discussions with Queen’s Park on the provincial portion of the $23.1 million, Ministry of Northern Development and Mines (MNDM) spokesman Cameron Ferguson responded by email that neither MNDM nor the Northern Ontario Heritage Fund have received a formal funding application from the rail carrier.

Ferguson said the province provided the company with a letter of support for their application to the National Trade Corridors Fund.

“It is the province’s understanding from the published criteria from the (fund) that confirmation of funding from a provincial body was not required to remain eligible for Transport Canada to consider applications.”

Back in 2010, Ontario and Ottawa announced $30 million in joint funding for the Huron Central to use toward line maintenance and improvements. That funding has since dried up.