On the rails in Cape Bre­ton

More de­tails on preser­va­tion agree­ment between rail­way and prov­ince

Cape Breton Post - - Front Page - BY NANCY KING

The agree­ment the prov­ince signed with the Cape Bre­ton & Cen­tral Nova Sco­tia Rail­way to pre­serve the Cape Bre­ton sec­tion of the line wouldn’t pre­clude a sale of the rail­road.

It also re­quires the com­pany to share data for fu­ture de­vel­op­ment or cost of ser­vice stud­ies.

The Cape Bre­ton Post re­quested a copy of the sev­en­page agree­ment from the De­part­ment of Busi­ness and re­ceived it this week, with only the sig­na­ture of rail­way pres­i­dent Louis Gravel redacted. It was also signed by Min­is­ter of Busi­ness Ge­off MacLel­lan. The con­tract states that the prov­ince will not ob­ject to any sale of the line “on terms and con­di­tions ac­cept­able to the rail­road in its sole dis­cre­tion.”

The agree­ment re­quires the rail­way to share ex­ist­ing data with the prov­ince or with any third party ap­proved by the prov­ince. Both the prov­ince and a third party would have to sign a con­fi­den­tial­ity agree­ment, how­ever.

If car­rier freight rail ser­vice re­sumes, the agree­ment will im­me­di­ately ter­mi­nate.

While the prov­ince touted the agree­ment as pre­serv­ing

the rail­way for a year, it was back­dated to April 1, mean­ing it ex­pires on March 31, 2018. The agree­ment does say that the prov­ince can re­new the deal on each an­niver­sary date by pro­vid­ing no­tice to the rail­road 90 days be­fore the term ex­pires.

The deal can be ter­mi­nated with 30 days no­tice by the rail­way or the prov­ince or au­to­mat­i­cally if the prov­ince fails to make a pay­ment within 30 days of it be­ing due.

The agree­ment was an­nounced ear­lier this month.

Port of Syd­ney De­vel­op­ment Corp. CEO Mar­lene Usher said in an in­ter­view Fri­day she hasn’t seen the agree­ment but wel­comed word that the rail­way may be re­quired to pro­vide

data for stud­ies. On the same day the agree­ment was an­nounced, the port an­nounced it had hired con­sul­tant Hatch to carry out a cost of ser­vice study, with the first phase bud­geted at just over $80,000, plus ex­penses. Rail is seen as be­ing a vi­tal com­po­nent of any fu­ture port de­vel­op­ment, par­tic­u­larly a pro­posed con­tainer ter­mi­nal.

“If they have ad­di­tional data, all the de­ci­sions with re­spect to cap­i­tal and/or op­er­at­ing are go­ing to be im­por­tant in terms of the fu­ture of the rail, be­cause when we fac­tor in the cost to trans­port a con­tainer from Syd­ney to wher­ever, rail is a piece of that, so you need to know all up front costs,” Usher said.

She said the preser­va­tion agree­ment is es­sen­tial in the ef­fort to pur­sue de­vel­op­ment at Syd­ney har­bour and hav­ing MacLel­lan specif­i­cally re­fer to the port in mak­ing the an­nounce­ment was a shot in the arm.

A pre­vi­ous CANRAIL study by the prov­ince set the cost of bring­ing the Syd­ney sub­di­vi­sion of the rail­way up to stan­dard at more than $30 mil­lion over five years.

Un­der the pro­vin­cial deal, the rail­way is also ob­li­gated to “use com­mer­cially rea­son­able ef­forts to de­velop a com­pet­i­tive rate struc­ture for fu­ture freight rail ser­vice.”

In ex­change for the sub­sidy, the com­pany agreed to not ap­ply to aban­don the line.

The rail­way agreed that cal­cu­lat­ing the amount of the preser­va­tion pay­ments — which are to re­im­burse only op­er­a­tional ex­penses for the Cape Bre­ton sec­tion of the line — must be a trans­par­ent process and agreed to pro­vide sup­port­ing doc­u­men­ta­tion in­clud­ing in­voices, re­ceipts and pay slips to sup­port its claims.

It also sets out a dis­pute res­o­lu­tion process that would re­sult in bind­ing ar­bi­tra­tion if the par­ties can’t re­solve a dis­agree­ment within 30 days.

The Syd­ney sub­di­vi­sion hasn’t seen any rail traf­fic since late 2015. Break-even vol­ume for it is 10,000 re­turn car­loads per year. By 2015, the track was see­ing fewer than 500 car­loads per year.

The prov­ince pre­vi­ously sub­si­dized op­er­a­tional costs up to $2 mil­lion a year when the line was op­er­at­ing.


A view to­ward the Cape Bre­ton and Cen­tral Nova Sco­tia rail yard in Syd­ney’s north end is shown in this file photo.


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