The prospect of keeping a vital rail link open between Sault Ste. Marie and Sudbury does not look good.
The Huron Central Railway (HCRY) appears to be making good on its intention to terminate rail service to the Sault by Aug. 15, and to Espanola by late October.
One week after meeting with city officials from Sault Ste. Marie and representatives from Essar Steel Algoma and Domtar, Huron Central president Mario Brault said he has heard nothing by way of a firm commitment by those two shippers to boost freight volumes on the money-losing rail line.
“I told the group we have a course of action we are undertaking at this point in time,” said Brault in an interview early Wednesday with Northern Ontario Business. “We would need a very, very significant change of direction to justify stopping this.”
Brault met last week with City of Sault Ste. Marie CAO Joe Fratesi, Bill Therriault of the city's multi-modal transportation committee, Essar Steel Algoma CEO Armando Plastino, Domtar's transportation director David White and a Domtar public relations official in the Huron Central's Montreal office.
The railroad is pulling out because of declining tonnage, mainly from Essar Steel Algoma, and the track's deteriorating conditions which require $33 million in repairs.
The 305-kilometre Sault-to-Sudbury line is owned by Canadian Pacific Railway, but the Huron Central Railway hauls steel and paper products for CP's customers and is responsible for track maintenance. Considered too marginal for CP to operate, it serves as a freight feeder line to CP's main line at Sudbury.
“Right now we haven't made any progress,” said Brault. “But the ball is in our court.”
Based in Brault's recommendations, the final decision rests with the board of directors of the parent Connecticut company, Genesee & Wyoming. City officials and shippers would be notified of a final decision this week.
Brault said the termination decision shouldn't come as a surprise to Essar or Domtar.
“They were hoping we wouldn't take it. They knew it was coming.”
In breaking a 20-year lease signed with CP in 1997, 45 jobs at the Huron Central in the Sault and Sudbury will be eliminated.
Unless there is some miraculous change of heart by the Genesee board, a sudden cash dump of public and private dollars into infrastructure and operating costs, or a white knight replacement railway coming to the rescue, a permanent track closure looks very real.
Canadian Pacific Railway has reaffirmed it has no plans to step in on an interim or long-term basis and would abandon the line.
“We will proceed with the discontinuance on the line as the HCRY stop service. We are not in a position to offer service at a loss,” CP spokesman Mike LoVecchio in an e-mailed response.
CP can file for track closure under Section 146.01 of the Canadian Transportation Act. The line will be advertised for sale, lease or transfer to up to 60 days following the Huron Central's withdrawal of service. If there are no takers, CP could tear up the track.
City of Sault Ste. Marie CAO Fratesi expressed optimism that the Huron Central could be kept operating past the August and October deadlines.
The city is hoping to buy more time to work out a long-term deal to keep the railroad running or at least extend the deadline until an alternative rail carrier is identified.
Fratesi said the Essar and Domtar delegation delivered some numbers on volumes and sources of capital upgrades for the track. He didn't think the differences are irreconcilable.
“Everybody at the table indicated they were prepared to do what they needed to do to make this work,” said Fratesi. “Everybody suffers some consequence, financial and otherwise, if this rail does not operate.”
Though sympathetic to the economic turmoil in the steel and forestry sectors, Brault said he heard nothing that would overturn their decision. Nor did he hear a commitment by Essar to divert steel shipments from truck and marine over to rail.
“The message was more of a group message that they want the Huron Central and Genesee & Wyoming to reconsider the decision and asked how much money would we accept to stay in operation for one year. At this point in time, it's going to be very difficult to change the course of the train.”
The Huron Central said it has lost millions in recent years due partly to shrinking shipments of pulp and paper products from Domtar's Espanola mill and steel shipments by rail from Essar to customers in Southern Ontario.
The railway continues to experience low traffic volumes.
In a recent Genesee & Wyoming quarterly report the Huron Central shipped 735 carloads for the month of June, compared to 1,471 during the same month last year.
During the year's second quarter, the railroad shipped 2,408 carloads compared to 4,528 during the same period in 2008.
Service to Sault Ste. Marie has been dramatically curtailed from operating daily to only twice a week. Rail cars are run into Espanola every day but are only transferred to Sudbury every second day.
Brault said the decision is not an easy one. “Very seldom (do) we decide to stop a rail operation. But things have been going very badly on the Huron Central over the last few years and the moment we took that decision there was not light at the end of the tunnel.”
Of all of Genesee & Wyoming's North American railway assets, Brault said the Huron Central is the worst performing.
During a recent trip to the Sault, Ontario Premier Dalton McGuinty promised the railway would be eligible for government infrastructure dollars to make capital upgrades during a future round of funding, but Brault said, “There's no cheque in the mail yet.”
CP is responsible for the marketing of the line, but there is not a lot of new business to be found outside of steel and paper products, said Brault.
The Huron Central has talked to Sudbury miners Vale Inco and Xstrata Nickel to drum up some new customers but without success.
”We've been waiting for this potential to materialize for 12 years.”
