On the rails in Cape Breton
More details on preservation agreement between railway and province
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.