16 June 2009
Shortline Railway Will Cease Sault-Sudbury Operations
| |
At the end of October, the burnt orange locomotives of
the Huron Central Railway will not longer run the rails between Sault Ste. Marie and Sudbury.
|
Sault Ste. Marie Ontario - At the end of October,
the burnt orange locomotives of the Huron Central Railway will not longer run the rails between Sault Ste. Marie and Sudbury.
Canadian Pacific Railway would consider abandoning a 305-km long track between Sault Ste. Marie and Sudbury if an answer
can't be found to replace a shortline railway that is discontinuing service this summer.
"CP would commence abandonment on the line if no internal solution could be found," said Mike LoVecchio, CP's senior manager
of media relations.
He was reacting to the 15 Jun 2009 news that Huron Central Railway (HCRY) is cutting service to Sault Ste. Marie on
15 Aug 2009 and to Espanola by 31 Oct 2009.
The HCRY railway stated the line is no longer economically viable and the forecast for improved volumes of freight traffic do not look
promising.
The news was released through its Connecticut-based parent company Genesee & Wyoming which posted a $2.1 million
operating loss in 2008 for the HCRY on year-end revenues of $7.4 million. The two rail companies were working with
customers to "effect an orderly cessation of operations."
The railway is a freight feeder line that ties into CP's main transcontinental line at Sudbury.
The move eliminates 45 jobs, mostly at the Huron Central's headquarters in the Sault.
LoVecchio said the announcement was "not unexpected" and CP has been in discussions for more than a month with its two main
customers on that line, Essar Steel Algoma in Sault Ste. Marie, and pulp and paper maker Domtar in Espanola, on various options to
ensure those companies will be served beyond the shutdown.
"At this point, I can't speculate on what those will be."
The track between the Sault and Sudbury is owned by Canadian Pacific Railway and was under a 20-year lease agreement to
Genesee & Wyoming reached in 1997. Huron Central provides the locomotive power, operations management, and track maintenance for
CP's customers.
LoVecchio dismissed the possibility of CP stepping in to take over service as "pure speculation" saying if a shortline
carrier like the Huron Central can't make a go of it, certainly a Class One carrier like CP can't either.
"CP has a duty to earn economic return for our shareholders and if the lower cost operator can't earn a return, I would suggest
that CP would be in very much the same situation."
This past spring, Huron Central president Mario Brault openly stated in a town hall meeting in Spanish that the company was prepared
to cease operations unless they secured $33 million in public and private dollars to upgrade the deteriorating track.
"I wasn't threatening anyone, it was just a fact of life, and life has caught up with us," said Brault. "I was pretty
candid with the community and customers all along."
Brault, who was in Sault Ste. Marie this week to speak with Mayor John Rowswell, Essar Steel, and Domtar officials said his company
served notification to CP of the termination of their lease and its up to them to undertake whatever abandonment process they are
contemplating.
The HCRY handled 16,000 carloads (roughly 100 tonnes per car) last year, but that wasn't enough volume to match their peak of 24,000
carloads five years ago.
With no new business, combined with the deteriorating track conditions, and the rocky terrain it crosses, they could not justify
making major capital upgrades. Discussions with Essar and other large and small customers to help invest in the line, "were not
fruitful."
The phased shutdown provides Domtar with more time to find transportation alternatives, while Essar enjoys service from Canadian
National Railway.
Brault wasn't assigning blame to any of their financially struggling customers.
"Even with good (freight) rates and a government program... we still don't enjoy the volumes that would sustain a line like
Huron Central. We've been losing money for three solid years and millions of dollars and the traffic is not there."
Brault said even if government stimulus money arrived today, the operation has reached the point of no return.
"The probability of us changing course of action is extremely, extremely low."
CP's freight deal with Essar expired at the end of 2008, but a six-month extension was reached to extend service by Huron
Central.
Brault would not comment if the Huron Central had an escape clause in their 20-year lease agreement, which expires in
January 2017.
The phased shutdown provides Domtar with more time to find alternative transportation, while Essar Steel is currently serviced by
Canadian National Railway.
Essar Steel Algoma spokeswoman, Brenda Stenta, called the Huron Central a "valued supplier" adding Essar management is
currently "evaluating the impact to our operation and assessing our options."
Although the steelmaker remains in discussion with the railway, she said it would be premature to comment further until the steelmaker
has completed their review.
The steel mill has cut production, but the long-term goals of its Mumbai, India-based owners are to double
steel production of hot and cold-rolled plate and coils. Expanding its transportation infrastructure of inbound raw
material and outgoing finished product by rail, ship, and road is also a key.
The railway's pull out could potentially deal a serious blow to future investment in heavy industry by Essar in the Sault.
It also severely impacts the city's global transportation strategy envisioned by Rowswell to handle international container freight
through an intermodal rail-to-truck facility.
Rowswell called it "disappointing news," since the city was very close to securing government stimulus funding for the
railway.
"There was the potential for two-thirds of $33 million being allocated for the shortline railroad and as a result of
that, I have no railroad (for the city) to commit their one-third."
He was unsure if that money is still available under government funding rules or if it can accessed as an incentive to attract a
replacement shortline operator.
"I really don't have an answer, I think it's up in the air."
Rowswell said he will speak with CP president and CEO Fred Green, but isn't expecting the railway to throw them a lifeline.
"I will talk to him, but I'm sure I know what he's going to tell me... that there's not enough traffic to keep that line open.
That's the biggest worry here."
Ian Ross.
|
|
