Taxpayer deal saves Cape Breton rail line for at least year

HALIFAX — The Nova Scotia government has bought a further one-year reprieve for a money-losing section of railway in Cape Breton, paying $720,000 in a deal that will help keep the tracks from being ripped up by the line’s U.S.-based owner.

Business Nova Scotia Minister Geoff MacLellan said Friday the one-year “preservation agreement” would cover expenses on the line formerly operated by the Cape Breton and Central Nova Scotia Railway.

MacLellan said parent company Genesee and Wyoming has agreed not to apply to abandon a portion of the rail line between St. Peter’s Junction and Sydney, while the government will cover the railway’s valid expenses at a cost of $60,000 a month.

He said it’s a matter of the company seeing the big picture with efforts underway for a proposed container terminal in the port of Sydney.

“They realized there would be some significant work on their part to formally abandon the line,” said MacLellan. “And they were hopeful that the potential of the Sydney port would turn into a reality and there would be container traffic moving up and down the Sydney subdivision line.”

MacLellan said the money would cover employee costs, insurance, security and building maintenance, but won’t be used for repairs or improvements to the rail line, which hasn’t seen freight service since the fall of 2015. The line operated by the railway between St. Peter’s Junction and Truro is not affected by the new agreement.

He said Genesee and Wyoming were looking for a multi-year deal and it’s his hope the current agreement will be extended.

“I’ll return to the Treasury Board each and every year to show what the progress has been ... what the expenditures were and look for a renewal at that point,” he said.

But a spokeswoman said the company would re-assess its position when the initial agreement expires and has made no promises that it is interested in moving beyond one year. “The idea behind the deal is to ... maintain just the strict minimum costs on the line to allow the government time to evaluate other projects,” said Caroline Healey.

The government’s $2-million annual subsidy for the rail line expired in September 2014. In January 2015, Genesee and Wyoming was given permission by the Nova Scotia Utility and Review Board to discontinue freight service in the fall of that year, which the company did, citing a lack of business.

But under a provincial law passed in the fall of 2014, the company couldn’t apply to the province to abandon the line until April of 2016 — a move it hasn’t made to date.

MacLellan said the new investment by taxpayers is justified, given what’s at stake with efforts to strengthen the Cape Breton economy. “The potential of the container port being constructed in Sydney is real. But the construction companies that build these super ports and the operators who would run these sites can’t be convinced that this is a viable option if there is no rail line.”

In fact, a trio of studies released in September 2015 said the return of the freight service would require more than the $31.4 million over five years that had been previously estimated to upgrade the line. The government-sanctioned studies also tied the railway’s future to the development of the port.