A northeastern Ontario rail carrier, faced with onerous track maintenance costs, is making inroads with Ottawa in securing much-needed infrastructure dollars.
But it's waiting on Queen’s Park to climb aboard as a funding partner.
At stake is the viability of the Huron Central Railway, a 278-kilometre line between Sault Ste. Marie and Sudbury, and whether its parent company, Genesee & Wyoming Canada (G&W), decides to keep the freight trains rolling to service three major industrial shippers.
The Montreal-headquarter short-line railroader needs $46 million over next five years to invest into ongoing track repairs and make government-mandated safety upgrades.
It’s the second time in less than a decade that the company has gone to government for railway infrastructure money.
Algoma-Manitoulin MPP Mike Mantha, who first raised the alarm, said railway executives told him earlier this week the company would make a decision whether or not to terminate service by Nov. 7.
He was told the rail carriers’ application for federal infrastructure dollars has been accepted but in order to move to the next stage of the funding process, there must be a committed provincial partner to provide matching dollars.
If there’s no interest from Queen’s Park in funding short-line infrastructure, Mantha claimed G&W is prepared to notify Canadian Pacific Rail – the railway line’s owner – that it’s prepared to move into a 30-day shutdown mode.
A G&W spokesman responded that no decision will be made until early 2018.
Mike Williams said by email the company has advised both Ottawa and Queen’s Park on the “impending need for funding to upgrade the railway infrastructure and maintain the rail service” along Lake Huron’s north shore.
Williams said there’s an opportunity to tap into the $2-billion National Trade Corridors Fund but the railway also needs help from the province.
“Although representations were made to, among others, the department (ministry) of transport and the department (ministry) of infrastructure of Ontario, neither has provided a positive response.”
Williams said G&W will contribute $5 million toward the $46-million package “to secure its future.”
A discontinuation of service would impact Essar Steel Algoma in the Sault, the Domtar paper mill in Espanola, and the EACOM sawmill in Nairn Centre.
These companies account for 88 per cent of the line’s traffic, amounting to 12,000 carloads annually.
“As we have explained many times, (the Huron Central) is the only viable transport option for Algoma Steel and many other customers along the line.”
G&W Canada president Louis Gravel added he is keenly aware of the line’s importance to the region’s economy.
“We will do everything that’s in our power to save HCRY.”
But if their requests go unanswered, “difficult decisions will be made in the beginning of 2018,” the company stated in the email.
Comment from CP Rail officials was not immediately available.
A response from Jeff Dean, press secretary to Northern Development and Mines Minister Michael Gravelle, said the Ontario government is committed toward making “strategic investments” in “viable, efficient, and sustainable transportation systems" that benefit Northern communities and industries.
“Ontario will continue to work with Huron Central Railway and others to evaluate this situation as it progresses.”
Sault Ste. Marie MP Terry Sheehan confirmed the rail carrier is making headway on the federal funding front.
The company has passed the initial screening process to put themselves in a position to obtain dollars from the trade corridors fund.
They were deemed eligible to submit a formal funding proposal.
According to the applicant’s guide on the Transport Canada website, expressions of interest had to be filed by Sept. 5 with eligible applicants having until Nov. 6 to file a comprehensive project proposal A review committee is evaluating the proposals before a funding decision is made.
“I’m encouraging them to put forward an extremely strong, iron-clad business case so that we can take a look at it," said Sheehan.
(Transport Canada) will be doing the due diligence that this company has a sound business case to continue operations.”
Sheehan said the fund is structured to provide a certain percentage of applicants’ project proposals with the intention of other funders being leveraged to join.
“There will be an expectation that the applicant will be able to put together the funding, whether it’s themselves or through partnerships.”
Sheehan, who’s met with G&W several times, said he knows the rail carrier is searching for other funders but was not aware of the status of their discussions with the province.
The National Trade Corridor Funds is a transportation infrastructure funding pool established last July to clear freight bottlenecks in the national supply chain and improve the flow of goods and people on a cross-border basis.
Sheehan contends the Huron Central is a vital piece of east-west transportation infrastructure that impacts communities in the northeast.
Although short-line railways are a provincial jurisdictional matter, he’s interested in working with his provincial and territorial counterparts to examine ways to keep these small carriers running.
“I’m very interested in the long-term viability of this particular rail line because I don’t want to do this every five years.”
Sheehan remembered back in 2009 when Huron Central threatened to drop service due to the track’s general state of disrepair and declining tonnage from shippers.
The loss of rail service would have been costly and threatened the survivability of industry shippers along the line who would have had to put hundreds of trucks on the road to get product to market.
The City of Sault Ste. Marie, Ottawa and Queen’s Park cobbled together a $33-million aid package for track bed improvements, rail replacement and bridge upgrades. But that funding pool dried up in 2015.
Genesee & Wyoming now claims freight volume along the line doesn’t cover additional costs like insurance premium hikes and new federal – post-Lac Megantic – safety compliance requirements, like upgraded rail crossings.
CP Rail, the owners of the Sault-to-Sudbury line, contracts Genesee & Wyoming to feed regional freight onto their main line at Sudbury, but doesn’t provide any money for track maintenance.
For shippers along the Huron Central, it’s a wait-and-see proposition.
Essar Steel Algoma spokeswoman Brenda Stenta said they are prepared to use “alternative means to get our product to market, reliably, and on-time.”
She said CP Rail remains a “valued supplier to Algoma and we remain optimistic that they will achieve a resolution that ensures their continued service to Algoma and other regional customers.”
“Domtar is currently monitoring the Huron Central Rail situation closely,” answered Jan Martin, community relations spokesperson for the Montreal-based paper giant.
“The rail line is important to our facilities. Once a decision has been made about the operation of the line we will have a better understanding of any impact to our business.”
EACOM public affairs director Christine Leduc said they were notified of G & W’s difficulties but have not received any potential “stop-service dates.”
“The sustainability of Huron Central Railway (HCR) operations is critical to our competitiveness and long-term viability,” said Leduc. The Nairn Centre sawmill employs 180.
With their customers hundreds of miles away, transportation is one of their biggest costs, she said.
“Should the (Huron Central) close, we would be forced to examine alternative methods of transportation,” said Leduc.
EACOM moves product to market by rail and truck, “so the alternative would be trucking.”
“We do not believe there is enough trucking capacity to make up this difference. In fact, even without the threat of a HCR shut-down, we have challenges with trucking capacity.”
Leduc understood provincial government officials were working directly with the railway and she remains optimistic that a solution can be found.
None of the companies responded if they were prepared to contribute money toward the upkeep of the line.
For Mantha, putting “30,000 trucks per year on our highways” creates a greater potential for accidents, increases the movement of dangerous goods, translates to higher road maintenance costs, and creates more greenhouse gas emissions.
