Friday, November 9, 2018

CN leaving Ottawa? A look at the possible scenarios

As several local rail enthusiasts have noted in recent weeks, Canadian National has listed all of its Ottawa-related trackage on its three-year abandonment list. That includes the entire Alexandria Sub, the section of the Smiths Falls Sub where is operates with running rights from Via Rail, one mile of the old M&O, its Vankleek Spur, L’Orignal Spur, its connections to Walkley Yard and the last remnants of the Beachburg Sub.

Here's a link to the CN page, where you can find the PDF report.

What does this mean? Well, it’s anyone’s guess what will happen, but it’s obvious that CN no longer wants to foot the bill to maintain what little trackage it does own in the Ottawa area, not to mention in Eastern Ontario (not including its Kingston Subdivision main line through Prescott).

There are many possible scenarios and consequences at play here, depending on what does happen. No doubt, CN will argue its operations in this area are no longer viable to its bottom line, which is probably fairly accurate, given the scale of the operation and the massive overall structure of the company itself.

This is how I see it, from my limited knowledge of CN and railways in general.

1. CN will sell what little trackage it owns on the Alexandria Sub/Smiths Falls Sub corridor to Via Rail. There is no question this will happen. On its abandonment list, it’s not clear to me if CN owns any of this trackage anymore. Someone with more information than me can fill me in. It is listed with an operating rights designation, which likely means it's not theirs.

2. Depending on what’s left to be sold off and what CN still owns in the city, is there a chance CN would continue operating freight services here on a strict running-rights basis? I don’t think so, but I’m raising the point for someone who knows more than me. If CN doesn't own much of anything, it would make no sense to continue on a running rights basis.

3. The opportunity for a new shortline railway to take over CN’s operation is now very real. For this, I reached out to the former General Manager of the much loved Ottawa Central Railway, James Allen. This is what he told me via email: “Can a go be made to operate traffic from Arnprior, Ottawa and L'Orignal/Hawkesbury...I think so. However much due diligence is required.”

We can only hope that someone as professional as Mr. Allen would step in and refocus all local efforts from a more effective shortline mindset. Ottawa will never again be a freight railway hotbed. But, Ottawa Central’s success from 1998–2008 is proof that a freight railway can succeed here.

If CN does indeed pull out, the question becomes who steps in? Is there an existing shortline company or company along the lines of Genesee & Wyoming (G&W's Goderich-Exeter Railway seen below near Mitchell, Ont.) that would be interested in Ottawa? It all depends on what is actually left and what new business could possibly be attracted.

4. If a shortline does step in, then the question of what to do with Walkley Yard becomes a moot point. I’m guessing a number of interested parties would be watching this situation carefully, including OC Transpo, which uses a portion of the yard as maintenance facilities for its fleet of Alstom diesel light rail trainsets that ply the Trillium Line. That line, as you know, will be extended as part of the second phase of the city's LRT expansion.

5. This development causes another headache for one of CN’s sole remaining customers in the west end, Nylene Canada, in Arnprior. This company has stated in the past that it has to have its caprolactum delivered via insulated tank car, given the nature of the substance. Trucking is not an option. A shortline would no doubt continue its weekly deliveries to Arnprior, but the company must still be uneasy.

It’s hard to see CN’s pending departure from Ottawa as anything but inevitable. I once tended to agree with those who stated at the outset that CN was only interested in OCR for the scrap value of the Beachburg Sub from Nepean Junction to Pembroke. That’s a lot of rail, worth tens of millions of dollars that it was able to retrieve and use elsewhere on its system. And I’m not mentioning the other assorted pieces of track it has removed in the last several years in and around Ottawa.

But, given that CN has been operating in Ottawa for 10 years now that argument doesn’t seem to hold up. If the company was only interested in rails only, then why would it stay in Ottawa so long? Maybe the opposition from Renfrew County and the Pontiac Region in Quebec held up its plans for the Beachburg Sub longer than it would have liked. Maybe the OCR acquisition was something CN had to shoulder as part of its purchase of the entire Quebec Rail Corp. portfolio in 2008.

As a railfan and major proponent of regional commuter rail, I’m hopeful that a shortline operator can step in and make a profit here. From a very selfish point-of-view, it would great to see more than one train a week on the railway tracks going through my neighbourhood.


AJ said...

Interesting sumation.

I personally think they held on so long because it was making enough money to survive, plus the real plum was the tracks themselves. They probably let the line run on it's own merit while they tended to other, more important business within their network and longterm plan. This situation is probably been a long time coming in that respect. I mean the CN abandonment page is entitled "Network Efficencies". It probably doesn't make sense for them to worry about the Ottawa area assets to which they clearly have little interest in or invest any time and resources into (and that includes beyond track maintenance).

However I too am hopeful that a shortline can turn something around. I am serious when I say that had I come into a substantial sum of money (fingers crossed for the LottoMax tonight), I would do some very serious due diligence on the line. Frankly I believe that the CN assets can make money and more importantly, can attract new clients. I firmly believe that proper due diligence (as Mr. Allen wisely pointed out) is needed and I feel would support my expectations.
Barring that streak of good luck, I still maintain hope that this infrastructure will be gobbled up by an existing larger shortline company or done through the efforts of someone local much like the OCR was. Time will tell however.

Steve Boyko said...

I think the survival of the CN trackage around Ottawa depends on the willingness of local government to support it. Any potential shortline will want some kind of government support to maintain the track in order to make it economic enough for them to operate it. Otherwise, it's unlikely that a shortline can make a go of it if CN can't.

Anonymous said...

I believe that CN got the OCR because it was included in the purchase of the rail lines in Quebec. Now CN wants to "rid" of itself the rest of the OCR trackage even though it was basically running rights except for the lines to Hawkesbury and L'Original.

If a short line does come in and start operating, what is to stop that company from being bought by another company sometime later in the future? That has happened before in Eastern Ontario. The line to Hawkesbury was CNs, it was sold to a short line, which was then bought by the owners of the OCR, then it was all bought again by CN who now wants to abandon it.

It is too bad a shortline probably won't be put in that is not operated by a parent company. It can be easier for a shortline to be in control of itself if it doesn't have a parent company looking over its shoulder. We have seen what can happen and what can happen when the results have been disastrous - the GEXR trackage has not been kept up by G&W and CN has had to fix it before they re-take it over. And, the HBRY's Omnitrax didn't want to spend the money to fix the line to Churchill even though it is an essential line to Canadians, but not to the Americans in the US who own the HBRY, or rather used to own it. Don't forget about the Lac Megantic line and how the MMA, it was revealed, skimped on necessary trackwork because it cut into their bottom line.

Perhaps we can contract out freight rail service in Ottawa like I think Guelph does with the Ontario Southland and Barrie does (or is it Orangeville or both Barrie and Orangeville?).

I don't know how that happened, but somehow it did in those cities. Mind you, they are probably more forward thinking than Ottawa is. Perhaps the City of Ottawa can talk to those cities to find out more information on how they manage freight traffic in those cities? Like I said before, they are probably more forward thinking than we are in Eastern Ontario and if Jim Watson doesn't want to do it, it won't happen. The Beachburg Sub wasn't a part of his plans and it got cut. A future mayor may have wanted to use the Beachburg Sub in the future, but we will never know because it wasn't in Jim Watson's plans and it doesn't exist anymore because of that.

Unknown said...

Is there any possibility CP could take over some of the freight operations in the area (such as Nylene) and base its operations out of its Smiths Falls yard?

_Don said...

One thing that doesn’t make sense to total abandonment is that in Kanata North for the past year and a half or so, there has been some major upgrades made to level crossings and the track itself. At the March road crossing, additional and updated crossing gates were added. As well just in the last month, proper crossing signals and gates are being installed at the Herzberg crossing, where its always been just a stop sign (for the train) and traffic lights. There has also been updates to a balast and ties around the area.

That’s a lot of money to pour into something to be abandoned. Maybe there is some short line thing in the works and it’ll be a handover to the OCR version 2.0.

Michael said...

Thanks for the comments, everyone. To answer some questions and respond to some comments.

1/ The work being done to the tracks through Kanata North was likely paid for by the owner of the rail line and the owner of the land where the rails sit. The rails themselves are owned by Nylene Canada while the land is owned by the city. So, CN would not be on the hook for any costs, I think.

2/ My personal opinion is that CP would not want to take on such a small piece of freight business in Arnprior, since it would be a long haul from Smiths Falls, up to Ottawa just to get there. CP and CN are not in this type of business anymore.

3/ I agree that having a Genesee & Wyoming or other shortline holding company coming in might not be ideal. I have seen the condition of some of the rail facilities in Goderich and Guelph and they are not great. Stay tuned for more on this later.

4/ I do think that any efforts to engage the city for some sort of support would likely be a failed effort, but it should be noted that OCR made a go of things here without local government support. Could a smaller OCR type company make it work? Well, if James Allen says it's possible, I believe him.

5/ I really think any solution is going to have to include Nylene Canada, because they might now be on the hook to buy the Beachburg Sub or be involved in its retention in some form. They are facing a tough situation. Otherwise, they have no rail access. They already have too much skin in the game to back away. They already own what's left of the Renfrew Sub. They are serious about rail service.

Unknown said...

I'm just going to repost what I had mentioned in a comment on another blog post here:

"It turns out that Nylene actually is served by the Arnprior & Nepean Railway (ANR) which was a shortline created by BASF back when CN abandoned the Renfrew Spur to allow freight service to continue to their plant. The plant, and the ANR are now owned by Nylene. Under the "Arnprior-Nepean Railway Company Inc. Act, 1992" the shortline isn't permitted to operate as a common carrier (i.e. they can't operate freight trains) because all operations were contracted out to CN (and eventually the OCR, and then CN again).

Given this arrangement, it's entirely possible that the ANR will purchase whatever's left of the Beachburg subdivision (and possibly Walkley Yard?) and continue to contract service out to CN which would allow service to the Nylene plant to continue.

This wouldn't help for any of CN's other customers, but perhaps another shortline will pop up to carry on that service, or the ANR could "expand" their operations by contracting more service out to CN. It'll be interesting to see what happens."

Under the arrangement described above, it's possible CN could continue to carry out the contracted work on behalf of the ANR, or that work could otherwise go to CP or any shortline that pops up in the area.

David said...

With the Pembroke trackage gone, making a go of a shortline in the Ottawa area becomes a lot more problematic. A shortline operating out of Coteau or De Beaujeu (at the CP interchange near Cornwall) might be plausible as it would be nearer the Eastern Ontario spurs, but in the former they'd have to negotiate with CN for yard space and for the latter they'd have to build one, both of which have obvious problems. Ironically, the easiest place to build a new yard may actually be at the Ivaco mill in L'Orignal. As for using Ottawa... just how much sense does it make to operate out of Ottawa to serve L'Orignal if everything going to/from L'Orignal has to come from Coteau or De Beaujeu? It might be different if there was a decent amount of traffic in Ottawa itself, but that doesn't seem to be the case. This likely explains James Allen's "due diligence" bit.

For its part, the City of Ottawa did nothing when the Beachburg was up for grabs, and now this time around it won't even have potential municipal partners in Pontiac and Renfrew short of something highly unlikely like track restoration. I would have a lot of trouble imagining the highly bureaucratic City of Ottawa under visionless Jim Watson taking on the trouble of running a shortline. Moreover, as far as they're concerned, they've been "burned" by the CTA for their actions at Bayview, so they probably want as little to do with mainline railways as they can get away with.

For Nylene, they're in a real fix now. If no shortline is in the offing, they either have to contract with CN out of Coteau, CPR out of Smiths Falls or run something themselves.

Matt said...
It looks like the city is going to snap up CN's tracks in town, so that should help Nylene and keep their section of track secure. This also helps Rideau Bulk. Of course, Ivaco is still up the creek, but the run up to Hawkesbury is all jointed rail and could probably be bought maintained on the cheap. They could also be easily serviced from Coteau du Lac. As for the stuff around Walkley, it is entirely possible that CN may operate it on a contract basis, or someone like Cando could be brought in. I suspect the whole logic behind the notice of discontinuance is the cost of keeping up the operation. The logistics of getting a crew out to Ottawa must be the biggest factor in this, given that local switching is all they do in the area. If CN would no longer be responsible for maintenance, it would likely make this a more viable operation. I suspect that at least, somewhere in the range of a few hundred to a thousand carloads per year rely on Ottawa trackage. As long as CN doesn't have to pay for upkeep of the infrastructure, they have nothing to lose by keeping the operation going.