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Is there a subsidy in the cards for the Huron Central Railway?

New incoming ownership for Genesee & Wyoming may finally free up government funding
Huron Central locomotive
Genesee & Wyoming Canada may pull the plug on Sault Ste. Marie-to-Sudbury freight service in early 2020 unless there's $40 million in government funding for track maintenance. (File photo)

U.S. federal regulators have approved the sale of short-line railroader Genesee & Wyoming to Brookfield Infrastructure Partners.

The Connecticut-based carrier is the parent company of Genesee & Wyoming Canada (G & WC), operators of the Huron Central Railway, which runs between Sault Ste. Marie and Sudbury.

The approval may finally loosen the purse strings on a government subsidy to keep rail freight moving in northeastern Ontario, at least for another five years.

Earlier this fall, G & WC vowed to drop service in early 2020 if Ottawa and Queen’s Park didn’t come through with a $40-million aid package for track maintenance and federally-mandated safety upgrades.

It’s the third time in a decade the Montreal-based rail carrier has threatened to discontinue service.

G & WC claims there’s not enough revenue generated from traffic on the 278-kilometre line to cover those infrastructure costs, and they can’t do it alone.

What was complicating matters in flowing funds to the railway was the timing of the federal election last October, as well as the status of Genesee & Wyoming’s ownership situation.

Last July, Brookfield and GIC, a Singapore investment firm, announced it was acquiring Genesee & Wyoming in a US$8.4-billion deal.

But the U.S. Surface Transportation Board (STB) had indefinitely held up the deal for review, until just recently.

The regulatory hurdle now appears to be cleared with Brookfield stating in its recent third-quarter report that the STB approved the transaction in October. Genesee & Wyoming announced Dec. 30 that the sale was completed.

With the Trudeau government re-elected and federal Transport Minister Marc Garneau remaining at the helm, former Sault Ste. Marie Mayor and retired CAO Joe Fratesi, leader of a railway stakeholders’ task force, called the STB approval “absolutely positive news.”

“Our stakeholder task force has requested a meeting with both Garneau and the provincial minister’s office (Caroline Mulroney) by the end of the year. Hopefully we see signs that positive news will be made.”

Fratesi remains “cautiously optimistic” that both levels of government will come through with support for the crucial regional transportation link.

The Huron Central employs about 40 employees but thousands of jobs in companies in the northeast rely on the service. The railway hauls steel, forest products and chemicals for industries such as Algoma Steel in Sault Ste. Marie, the Domtar paper plant in Espanola, and the EACOM sawmill in Nairn Centre.

If the railway was to pull the plug, shippers would have to resort to placing freight on tens of thousands of carbon-emitting heavy trucks every year, if they could find them.

In the long run, Fratesi is hopeful government will eventually set aside dedicated funds to assist short-line railroads with infrastructure costs.

“I think people see this as more than just a transportation issue, it’s a regional economic development issue.”

G & WC hasn’t issued a definite drop-dead date on withdrawing service, but a Domtar spokesperson said previously they were advised the railway is looking at March 2020.

Genesee and Wyoming owns 120 short lines in North America, including the Huron Central and the Ottawa Valley Railway, the latter runs between Sudbury and Temiscaming, Que, via North Bay.

Canadian Pacific Railway (CP) owns the tracks between the Sault and Sudbury, contracting G & WC to be the line’s operators. But CP does not contribute any funds toward track maintenance.

G & WC said previously that if their five-year forecast holds true, the freight revenues generated would put them in a cash positive position to reinvest back into the line.