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Short-line railways surviving, not thriving

Transportation expert calls for government investment in regional rail
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Rail crossing
The owners of the Huron Central Railway are calling for government assistance for line maintenance, including $8 million to make federally-mandated rail crossing upgrades.

The survivability of Canadian short-line railroads is approaching a critical junction, says an independent rail expert.

The struggles of northeastern Ontario’s Huron Central Railway should be a “canary-in-the-coal-mine” warning that government needs to support small railroaders in the same manner that it subsidizes other modes of transportation, said Greg Gormick, an Oshawa-based consultant.

Short-line railroads have long carried the burden of track maintenance costs, but new federal safety regulations could reach a “tipping point” that kills freight service to many regions of Canada.

“If short lines vanish, 20 to 25 per cent of CN and CP’s traffic vanishes,” Gormick said.

“Since they are the smallest player in the rail system, they suffer the most because our governments don’t pay attention to railroading.”

For the second time in less than a decade, the Huron Central is appealing for public funding to maintain the 278-kilometre Sault Ste. Marie-to-Sudbury line.

Operating in self-described “survival mode,” the Huron Central’s parent company, Genesee & Wyoming Canada (G & W), claims the freight revenue generated from the line only covers operating expenses.

Millions more are needed for federally mandated upgrades. It’s asking for a five-year funding lifeline of $5 million to $6 million annually from Ottawa and Queen’s Park.

The 44-employee Huron Central hauls freight for Essar Steel Algoma in the Sault, Domtar pulp and paper in Espanola, and EACOM sawmill in Nairn Centre. Those companies account for 88 per cent of the line’s traffic, amounting to 12,000 carloads annually.

“In five years, there is a lot that can happen,” G & W president Louis Gravel told Sault Ste. Marie city councillors on April 24.

Down the road, he said, mining and other business could “improve the volume and the tonnage to make it profitable in the long term.”

Short lines are often overlooked and under-appreciated for the specialized role they play in Canada’s transportation network. They feed freight to the major railways on branch lines deemed too marginal for Class 1 carriers like CN and CP Rail to operate.

These routes are either sold off or leased to more efficient and customer-focussed small railroads.

But what they inherit is often years of deferred track maintenance that they must finance on their own.

Simply passing those costs onto the shipper can hurt both the rail company’s and the customer’s competitive position.

Gormick said Ottawa and Queen’s Park’s policy attitude toward rail is largely “laissez-faire” with a track record of either inaction or crisis management.

In 2013, Gormick said Queen’s Park was hands-off when infrastructure repairs proved too much for the owners of the St. Thomas and Eastern Railway. It was left to CN and another short-line railway to save the service for shippers in southwestern Ontario.

“That was a warning right off the bat. How many more are willing to go?”

When Genesee & Wyoming threatened to abandon the Sault-Sudbury line in 2009 because of poor track conditions and declining freight, the City of Sault Ste. Marie, Ottawa and Queen’s Park scrambled for $33.3 million to pour into track upgrades.

The railway’s loss would have been devastating to area industry.

That stop-gap funding has now run out, but the maintenance costs continue.

Gormick said short lines operate at a competitive disadvantage against the trucking and inland marine industries, which depend on publicly funded infrastructure.

“(Railroads) need the kind of assistance that we seem to have no trouble giving to marine, highway and air operators,” said Gormick.

“In a region like Northern Ontario, if you want to see even more industrial deterioration and withdrawal, then don’t help the short lines.”

Gormick is working with Oxford County on an advocacy campaign for improved public transportation links in southwestern Ontario.

His recent report, “Empowering Ontario’s Short Line Railways,” lays out the challenges faced by the province’s 10 privately and municipality owned short-lines.

It calls for changes in public transportation policy, backed with investment to maximize their potential.

Past and current government infrastructure programs are usually geared toward road and highway projects, and federally regulated railroads; not for small provincial railroaders.

Now, in the post-Lac Megantic era, new federal regulations have increased minimum liability coverage that will dramatically raise some short lines’ insurance premiums, along with other required safety management systems improvements.

Ottawa is also imposing new federal grade crossings regulations, requiring upgrades to railway crossings.

Genesee & Wyoming told Sault city council that $8 million alone is needed for the crossings along the length of the line.

By comparison, Gormick said upper levels of government should look to the U.S. where the short-line rail industry is thriving.

Progressive federal and state programs provide small railroaders with tax credits, direct grants for track maintenance, and shipper assistance funds to help build sidings.

“In the United States, they have been more interventionist than we’ve been in Canada.”

Gormick said the upper tiers of government needs to follow the advice of its agencies and consultants.

A March 2016 report of the Canadian Transportation Review makes a case for a new rail freight policy and short-line funding programs mirroring that of the U.S.

Two Ontario Climate Change Secretariat reports contain recommendations that something must be done to help these operators.

“You’re dealing with a form of transportation that is five times more energy efficient than trucking,” said Gormick.

“Shouldn’t the railways be getting something a little better than energy inefficient modes?”

Sault Ste. Marie MP Terry Sheehan said he’s been aware of the Huron Central’s situation for some time. To date, most of his conversations about the rail carrier’s infrastructure needs have been general in nature.

He’ll be asking the company to document its specific needs, and he’ll review them with his Northern Ontario MP colleagues before arranging a meeting with federal transport minister Marc Garneau and infrastructure minister Amarjeet Sohi to make a request for support.

“I have no problem advocating for any infrastructure program from any group that’s going to, not only sustain jobs and opportunities but looks at growing them.”

Sheehan, who served on city council when support was rallied to save the railway in 2009-10, said the company didn’t impose any timelines when funding needs to be in place.

Last November, Garneau announced Ottawa is investing $10.1 billion in transportation infrastructure as part of his Transportation 2030 strategy to eliminate bottlenecks and build “more robust trade corridors.”

Details remain sketchy if short lines will be able to access any of that funding.



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