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New short-line rail owners of former Algoma Central look to get on a roll in 2022

Watco putting the equipment pieces and workforce in place to serve Sault industrial shippers

The opportunity to revive freight service on an underutilized piece of track in northeastern Ontario was something Wesley Logan couldn't turn down.

The director of operations of the newly dubbed Agawa Canyon Railroad (ACR) was eagerly looking forward to serving a regional customer base that U.S. short line railroader Watco believes has open-ended potential.

Last spring, the Pittsburg, KS-based logistics company picked up the former Algoma Central from Canadian National (CN) in a package deal that included 900 miles of track in Michigan and Wisconsin, finally closing the deal in January. The ACR officially opened for business on Feb. 1.

Of comfort to local rail enthusiasts, the familiar "ACR" acronym remains, as well as the iconic black bear image, reincarnated into a new corporate logo and on company apparel.

What was attractive about the job for Logan, who hails from Nova Scotia, was the familiarity he had with Watco and the open-ended opportunity with the line.

"I had worked with some of the folks with Watco in the past. Some great people. 

"But what was really intriguing was starting up a railroad from scratch. There's no other railroad in Canada that Watco owns. To come on board and to shape and form that railroad was really attractive."

About a month after Watco signed a letter of agreement with CN in March last year, the company reeled in Logan from the East Coast, where he worked as director of operations with NBM Railways, an amalgam of three short-line railroads between St. John, New Brunswick and Maine.

Watco's original plan with the former Algoma Central was to start operations last July 1, but there were regulatory delays with the U.S. Surface Transportation Board. The agency finally approved the transaction on the whole package of midwestern U.S. and Ontario track properties just before Christmas.

Established in 1983, Watco operates 44 short lines over 7,500 miles of track across the U.S., offering industrial switching services, material handling, warehousing and rail car repair services.

At 5,000 employees, Watco made the Forbes list in 2021 of America’s Best Mid-Size Employers, based on working conditions, salary, potential for development, and company image.

This is the rail carrier's first foray into Canada.

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In the deal, Watco gains access to important interchanges with Canadian Pacific at Franz and Canada National at Oba, the latter being where the line terminates at Mile 245. Some 50 miles beyond, north to Hearst, that still remains in CN hands.

Since Logan came aboard, Watco has pocketed its short-line certificate from the province, obtained the railway operating certificate from Transport Canada, and gone about getting the right people in place to come up with operating and safety plans.

"That's really what was exciting about it. The service that we want to provide for our customers is exciting as well." 

To date, the company has a core team of 27 Sault-based employees, but they will be looking for people to fill more positions, some to be stationed at Hawk Junction, near Wawa. 

Logan said they're actively searching for conductor-engineers, and they're willing to interview folks from across Canada.

How much their workforce expands, Logan can't say for certain. It depends on how the business grows and evolves.

"Depending on service, up north, we're not 100 per cent sure what the final number will be, but our plan was 27. It'll increase for sure.

"We want to get our feet underneath us, and then grow the team member base and build a service plan to get running trains north and south."

The former Algoma Central Railway was purpose-built at the turn of the last century to haul primarily ore from the iron mines in Wawa to feed Algoma Steel's furnaces in the Sault, as well as logs for mills at either end of the line. The lucrative and voluminous ore haul ended in 1998 when the Sault steelmaker chose to permanently shutter the Algoma Ore Division. 

But logs and forest products have always been a traffic staples on the line. The ACR became a subsidiary of Wisconsin Central in 1995 before that regional carrier was acquired by CN in 2001.

Logan finds there's not much in the way of new business to drum up along the length of the line and no mines to the north that can generate the kind of tonnage that Wawa once did. But the Sault does have a solid base of industrial customers, he said, mentioning Algoma Steel, Tenaris, Arauco, Boniferro Mill Works and J. M. Longyear.

He said their focus is to offer more and better rail options to those companies and provide them with access to Western Canada via the interchange at Oba.

"I feel we can get more wood on rail and farther down to their destination." 

The company has yet to make a maiden freight run, but Logan expects activity will ramp up over the six months with trains running all the way north of Oba.

"Our farthest customer is 10 miles out of town. We haven't started that service yet, but we plan to this year."

Most of their current activity in the Sault is taking over what CN had in place, switching customers in the Sault and building trains for CN crews that come across the border from northern Michigan.

The typical role of short lines is to be haulers on railways that bigger rail carriers, like CN and CP, deem marginally economic. Usually, short lines feed freight onto the main lines of larger Class One rail carriers and do so as lean operators with a keen focus on customer service in small markets.

The Huron Central Railway, between the Sault and Sudbury, is owned by short-line operator Genesee & Wyoming, shipping steel and forest products east from the Sault, Espanola and Nairn Centre onto CP's main line in Sudbury. G&W leases the line from CP.

For Watco, the ACR is logistically strategic and is ripe with opportunity.

"You got one of the biggest steelmakers in the industry (in Algoma Steel), and we're directly serving them, and (the line) interchanges with three different railways," said Logan. 

"The potential is big. Northern Ontario with the forestry industry, the potential for the Ring of Fire — I know that's far off — but there's definitely opportunity and I know Watco values this property."

As for projections of rail car loads for 2022, Logan can't divulge that information.

"But we're gonna see how well we do this," he said, "and build a plan for next year."

By way of locomotive power, Watco brings along four SD40s and one GP40, made by General Motors' Electro-Motive Division, with another on the way, plus the three F40s and 17 coaches for Agawa Canyon Tour Train.

Of great relief to Sault Ste. Marie tourism officials is the return this year of the Agawa Canyon Tour Train.

Logan said the track they inherited from CN is in good shape and is maintained up to federal Class 2 track standards for passenger rail traffic.