Preserving the Canada Southern Railway in southern Ontario

Petition

January 8, 2002

Ms Johanne Gélinas
Commissioner of Environment and Sustainability
Office of the Auditor General of Canada
240 Spark Street
Ottawa, Ontario
K1A 0G6

Dear Commissioner,

Greetings, this is a petition to raise the profile of rail use in general in Canada and to preserve the integrity and increase the use of the largely dormant Canada Southern Railway in Particular.

Like our parent organization, Transport 2000 Ontario, RWTF is not affiliated with the transportation industry and we follow the Transport 2000 Ontario maxim of advancing and endorsing policies and actions which promote environmentally, economically and socially sustainable transportation.

Heavy loss of Rail

Over the past few decades Ontario has lost in the neighbourhood of three thousand miles of environmentally friendly rail infrastructure. These have been largely branch or secondary lines. Cities and towns such as Owen Sound, Goderich, Kawartha Lakes and Midland are currently limited by being served by road only.

The CASO High Speed Line

Now, however, a main line railway in Ontario is currently at risk, the Canada Southern Railway. This railway served as a short cut through Ontario for name New York Central System Streamliners, time sensitive mail, express and freight trains as well as local trains and branch lines serving Ontario communities. The present CASO owners, Canadian National and Canadian Pacific Railways, published a Notice of Discontinuance for the CASO from St. Thomas, Ontario to Attercliffe (near Hagersville) on Oct. 19, 2001. This is a matter of about 83 miles of the 251 miles between Windsor/Detroit and Fort Erie/Buffalo.

This line is untypically level and straight. It has a solid foundation with high quality steel rail. It was built during the era of heavy, track pounding steam locomotives for one hundred plus miles per hour service. It was, and could be again, a railway race track.

Modal Shift to Rail is Essential

At a time when truck traffic is projected to increase by 10 percent a year over the next decade, we should be preparing now for handling much if not most of both current truck traffic flows and projected traffic flows by the more benign mode: rail, intermodal and siding to siding freight as well as passenger.

Potential of the CASO

When abandonment of the CASO was first put forward a few years ago, this committee undertook a business case for its continuance as a border to border piggyback shortcut for truck traffic and the potential use by on-line industrial traffic then on the roads. The results were encouraging and we thought that we had located a suitable investor group. As we understood the results of several months of negotiations, the investors were up against two unwilling vendors. After last October 19, we began looking for a short line railway investor for the segment up for abandonment only, as this is what CN and CP seemed more likely to accept and we are continuing with a business case. It seems that much of on-line traffic potential, wants to reach a border crossing and the short line operator would have to hand traffic over to CN or CP to continue the journey in a more circuitous routing.

U.S. Protects Rail Corridors

In the United States there are two pieces of federal legislation which prevent railway lines from being fully abandoned. The railroad companies may remove their tracks and the corridors may be used as interim recreational trails, but because of the recognized energy efficient/low pollution nature of rail, the corridors must remain available for the return of rail transportation. There is no such protection for irreplaceable rail corridors in Canada.

Also, in the United States, senior governments work with shippers and rail companies to avoid abandonments in the first place, in the interest of geographic equity of economic opportunities/the avoidance of economic foreclosure and in the interests of reducing road costs, collision risks, air pollution and accessing markets in a less costly fashion.

The CASO is Needed Now

We suggest that the CASO could be put to work, after some long neglected but routine maintenance, very swiftly. And there are win win strategies to encourage a modal shift.

A doubtful Scenario

But knowing how these things have worked in the past, the integrity of CASO is probably lost: i) Potential short line operators probably see insufficient local traffic St. Thomas to Attercliffe to justify the investment; ii) municipalities are unlikely railway owners¹; iii) the province of Ontario is interested only in four lane highways. It is interesting to note that the Environmental Commissioner for Ontario may not deal with transportation matters and; iv) the federal government, I have been told by Transport Canada, buys tracks only for VIA - which is an interesting VIA/AMTRAK possibility with perchance the return of the 20th Century Limited.

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¹ In the case of Orangeville and Collingwood, their municipalities are at the end of their respective branch lines and it was either lose their industrial base and not attract new heavy haul industry, or get into the railway business.

We hope through this petition to raise the profile of rail in general and the CASO matter in particular. In four months the line could be a new routing for Highway #3, sold off to adjacent land owners in short pieces or have condominiums built on it. However, if awareness of your willingness to examine the issues of this petition becomes evident, it could be just the spark to encourage creative, common sense action. An Order in Council was once undertaken which obliged CN and CP to preserve and operate the CASO until the year 2005. The CASO was effectively, however, shut down. Apparently the 1996 Canada Transportation Act made that order null and void. Time is of the essence. Railway tracks have a way of disappearing, the cost of relaying the line is needless and retrieving the right-of-way once sold off, probably impossible.

I have packaged support material under the following headings:

1. Some basics about the Canada Southern, including maps, the notice of discontinuance and the RWTF submission to CNR in response to the notice.
2. Our case for the CASO.
3. Examples of U.S. protection of rail lines.
4. Problems with roads emphasis, the alternative to rail, also a modal shift strategy.
5. Road/rail energy use and cost comparisons.
6. The environmental case for rail renewal.
7. Loss of rail hurts communities.
8. The RWTF Road and Rail Backgrounder plus the case for rail electrification.
9. Municipal and other support for a Rail Renewal Task Force in Ontario. Thus far the Government of Ontario is disinterested.

Please consider what can be done to: i) stop further rail line abandonments in Ontario, notably the CASO, ii) preserve abandoned rail corridors, e.g. the abandoned Uxbridge to Belleville secondary mainline, the former CN Campbellford Subdivision. Note enclosure including our Route Banking proposal [not available].We urge you to support our call for a Rail Renewal Task Force and in the long term encourage strategies which would level the road/rail playing field, including the taking of environmental factors into serious consideration so that market forces could function in ways which make us more competitive and protect the environment, achieve smog reduction, meet the Kyoto protocol, reduce road collisions, road costs, etc. We believe that although we speak of Ontario, this matter has national implications. We are also interested in replacing strategic rail lines.

Since the Honourable David Collenette, Minister of Transport can't intervene in the Canada Transportation Act process, he prefers not to be quoted regarding the CASO. There are however, other processes currently in operation: i) the Canada Transportation Act Report Review and the ii) Creation of the Transportation Blueprint for the Next Decade and Beyond; which could be brought to bear on rail abandonment matters. As long as the rails and rights-of-way are not lost between processes. There is also the possibility of the federal government purchasing the line for VIA purposes, for which there is clear precedent, perhaps in collaboration with AMTRAK.

I would think that the Auditor General would be interested in this petition.

Yours truly,

[Original signed by Ross Snetsinger]

Ross Snetsinger
Chair
Rail Ways to the Future Committee
247 Silverbirch Avenue
Toronto, Ontario M4E 3L6

*[attachments not available]

[the petitioners also submitted a Petition Supplement dated 24 January 2001]

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Petition Supplement

This committee and our Transport 2000 parent organization, greatly look forward to the comments of the Minister of Transport, the Honourable David Collenette, MP, to each of the concerns or points itemized on pages 1 and 2 of our January 8, 2002 petition.

In addition, we would like to pose the following specific questions:

1. When is Canada going to see a Rail Renewal Task Force?

2. With regard to the following processes:

   a) Canada Transportation Act Report Review,

   b) Creation of the Transportation Blueprint for the Next Decade and Beyond, is the minister prepared to take a position on the protection of abandoned or to be abandoned rail lines, including the track and bridge infrastructure where it currently exists?

   E.g the CN/CP CASO Subdivision remains intact, while the former CN Campbellford Sub. has lost its tracks, but the corridor remains. Both require protection.

   Is the minister aware of the U.S. federal legislation which protects abandoned rail lines while allowing interim recreational trail use?

3. Due to the extreme urgency of the Canada Southern situation (After February 20, 2002 the tracks could be lifted between St. Thomas and Attercliffe, Ontario), is the minister prepared, for the reasons itemized in the first part of this petition and in the attached CASO Action Alert [not available], to ask for an Order in Council on this section of track in order to protect the full integrity of the CASO, Windsor/Detroit to Fort Erie/Buffalo?

   We would think that our friends in the United Slates would appreciate that Canada wishes to protect the integrity of this short cut through Ontario between Detroit and Buffalo/New York and Chicago. Passenger rail is a growth industry in the United States. The Amtrak high speed electrified Acela trains between Boston and Washington could some day operate on the CASO route or a gas turbine version. Also of course, there is the matter of cross border security.

   There may well be other at immediate risk rail lines across Canada, that although they may not be at the same international level of strategic importance as the CASO, would never-the-less be important in maximizing the geographic equity of future economic opportunity, avoidance of road capacity increases, smart growth promotion, reducing emissions for Kyoto and health reasons, etc. We ask if the minister is prepared to intervene in other strategic rail abandonment emergencies, until proper legislation can be formulated?

4. Since the Government of Canada does purchase rail lines for VIA, would the minister be prepared to work for the banking of the, at immediate risk, part of the CASO for future VIA service on the CASO?

5. Is the government prepared to invest in railway infrastructure to reduce transit times between major cities? E.g., in southern Ontario, between Kitchener and Toronto so as to reduce travel times from one hour and forty minutes to one hour flat.

6. Is the government prepared to invest in infrastructure used by GO transit to increase capacity so that GO is able to provide sufficient trains for all those customers who want to use it? E.g. second and third tracks where congestion occurs.

7. Does the minister agree that in general rail freight and high speed and other modern rail passenger options are more sustainable environmentally than competitive modes?

If there are any questions about any of these questions, the minister's staff are welcome to contact the undersigned.

Respectfully submitted,

[Original signed by Ross Snetsinger]

Ross Snetsinger
Chair

[Rail Ways to the Future Committee]

January 24, 2002

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Minister's Response: Transport Canada

Letter dated August 16, 2001
Letter dated February 28, 2000
Letter dated May 23, 2000
Letter dated October 6, 2000
Letter dated February 16, 2002

April 22, 2002

Mr. Ross Snetsinger
Chair
Rail Ways to the Future Committee
247 Silverbirch Avenue
Toronto, Ontario
M4E 3L6

Dear Mr. Snetsinger:

I am writing in response to your petition letter dated January 8, 2002 and petition supplement dated January 24, 2002, concerning the use of rail in Canada and the current usage of the Canada Southern Railway (CASO).

At the outset, I would note that the issues raised in your petition have been addressed in previous correspondence to you from Transport Canada.

However, with respect to rail renewal initiatives, you may be aware that in 1998, the Standing Committee on Transport examined passenger rail services in Canada. In addition, the Canada Transportation Act Review Panel recently reviewed various issues related to freight and passenger transportation by rail.

With regard to your concern about the creation of a Transportation Blueprint for the Next Decade and Beyond, please note that Mr. Cameron Summers touched upon these issues in his correspondence to you, dated August 16, 2001. I have attached a copy of his letter for your review.* It might interest you to know that I intend to bring forward the Transportation Blueprint in the spring of 2002, which will address the broad directions that the federal government will pursue in transportation over the next decade and beyond as well as specific proposals of the Canada Transportation Act Review Panel. Consultations will follow before the tabling of related legislative amendments to the Canada Transportation Act in the fall.

In addition, the issue of discontinuance and transfer of rail lines under the Canada Transportation Act was addressed by both Mr. Anthony Polci and Mr. Summers in correspondence dated February 28, May 23 and October 6, 2000. These letters are also attached for your consideration.*

With respect to the CASO, I clarified Transport Canada's position in my attached letter dated February 16, 2002.* Furthermore, in response to the fourth issue of your petition, VIA Rail does not currently use CASO nor does it plan to at any time in the future.

In his attached letter dated October 6, 2000, Mr. Summers outlined the Government of Canada's significant investments in railway infrastructure through the provision of $401.9 million in new capital funding to complement the existing $170 million in annual operating subsidy for VIA Rail. As noted in his letter, there are several improvements that will arise from passenger rail revitalization, such as the reduction of transit times between major cities as well as the addition of new services to communities outside the Greater Toronto Area. I am pleased to report that the first changes occurred in October 2001 when VIA added a new frequency between Toronto and Kitchener, Toronto and Aldershot Hamilton, and extended the route of one Toronto Windsor train to operate through Oshawa. More trains will be added once rail line improvements are completed by 2003.

With regards to GO Transit, Mr. Summers indicated the Government of Canada's new initiatives to improve urban rail in the Greater Toronto Area in his attached letter dated August 16, 2001.* It may interest you to know, that the Government of Canada made a commitment in a recent Speech from the Throne to work with provincial, territorial and municipal partners across Canada to help improve public transit infrastructure and to launch a dialogue on the challenges facing urban centers. In May 2001, the Prime Minister appointed a Caucus Task Force on Urban Issues to explore how the federal government can work more collaboratively within federal jurisdiction to strengthen the quality of life in our large urban centres. The Task Force has been consulting with citizens, experts and other orders of government to examine a number of issues, including urban transit. The Task Force is scheduled to present an interim report in April 2002 and final recommendations by December 2002.

Furthermore, in Budget 2001, the Government announced its intention to provide at least $2 billion in funding for large infrastructure projects that can bring lasting economic and social benefits while providing both stimulus and productivity benefits. This Fund will provide assistance to large scale strategic infrastructure projects in cooperation with provincial and municipal partners, as well as with the private sector. Eligible infrastructure projects areas include highway or rail, local transportation, tourism or urban development, sewage treatment and water infrastructure. The Fund will help the Government of Canada achieve its goal of building a stronger economy and improving the quality of life of all Canadians.

Finally, the federal government recognizes that modern freight and passenger rail services can have positive impacts on our environment, economy and society as a whole, when used efficiently. As such, we encourage a vibrant and competitive rail freight industry and are committed to the revitalization of passenger rail in Canada. Indeed, I am interested in any initiatives that encourage the best use of all modes of transportation and support public private partnerships designed to achieve efficient and effective transportation for Canada's shippers and travellers.

Yours sincerely,

[Original signed by David Collenette, Minister of Transport]

Hon. David M. Collenette, P.C., M.P.

*[see attachments]

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Attachment

August 16, 2001

Mr. Ross Snetsinger
Rail Ways to the Future Committee
247 Silverbirch Avenue
Toronto, Ontario
M4E 3L6

Dear Mr. Snetsingen,

Thank you for your letter of June 11, 2001, and enclosures, to the Minister of Transport, the Honourable David M. Collenette, regarding rail transportation in Canada. The Minister has asked me to respond on his behalf.

The media clippings regarding the issues of railway crossings and the activities of the Rail Ways to the Future Committee, which you enclosed in both your current and previous correspondence, are interesting. I have taken the liberty of forwarding them to the appropriate departmental officials for their consideration.

The department is certainly aware of Mr. David Bradley's recent article in the publication Municipal World. Mr. Bradley also wrote to the Minister regarding the issues raised in this article with respect to the proposed railway crossing regulations. Enclosed for your information is a copy of Minister Collenette's response*.

On a different note, you may be aware that, on April 11, Minister Collenette announced the launch of a major effort towards renewing the transportation agenda of the federal government. The objective of this initiative will be to develop a new blueprint to guide decisions and respond to challenges in the transportation sector over the next decade.

The Minister initiated this undertaking by identifying several key transportation challenges that Canada must address. On June 1, he announced the release of a paper entitled Creating a Transportation Blueprint for the Next Decade and Beyond, which briefly outlines the key challenges. In the coming months the Minister will continue to hold round table discussions with representative stakeholders to define challenges and examine potential solutions to our urban transportation problems. Many of the ideas and themes outlined in your previous correspondence to the department are also highlighted in this document. I have taken the liberty of enclosing a copy of the Blueprint paper for your information*.

As you are aware, at the Toronto Smog Summit on June 11, Minister Collenette announced several new initiatives that VIA Rail will be undertaking as part of the government's efforts to reduce smog in major urban centres. Significant projects for the Greater Toronto Area include an increase in the number of VIA trains operating at peak hours over existing routes, as well as an interline agreement between GO Transit and VIA, whereby their trains will carry each other's passengers between stations served by both companies.

The government's intention is to supplement GO Transit services using existing VIA trains where there is a business case to do so. Each one of these services is an extension of existing Montreal-Toronto, Ottawa-Toronto or Toronto-Windsor trains. The services are therefore expected to benefit passengers travelling through Toronto, as well as local commuters.

Again, thank you for writing and for your interest in promoting sustainable transportation. The Minister appreciates the work you have undertaken to promote opportunities for rail transportation in Canada.

Yours sincerely,

[Original signed by Cameron Summers, Special Assistant - Ontario, Office of the Minister of Transport]

Cameron Summers
Special Assistant - Ontario

Enclosures*

*[Not available]

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Attachment

February 28, 2000

Mr. Ross Snetsinger
Chair
Rail Ways to the Future
247 Silverbirch Avenue
Toronto, Ontario
M4E 3L6

Dear Mr. Snetsinger:

Thank you for your letter of January 25, 2000, to the Minister of Transport, the Honourable David M. Collenette, regarding passenger rail. The Minister has asked me to respond on his behalf.

You may be assured that Minister Collenette is committed to the revitalization of passenger rail in a practical and affordable manner, and he hopes to make a public announcement on this matter in the near future.

While the British example of franchising has been studied at Transport Canada, it was for the purpose of examining all options and their possible applications to the Canadian situation. I would note, however, that the Minister's commitment is to revitalization and not to franchising, per se.

VIA relies on the freight railways for access to track infrastructure since having its own track would be prohibitively expensive. As such, decisions pertaining to rail line discontinuance rest with the freight railways. However, before any such line is actually discontinued, it is offered to the province and local municipalities at net salvage value. Therefore, lines which are truly valued by communities and are considered critical to local infrastructure at the local level can remain in existence.

Thank you again for writing.

Yours sincerely,

[Original signed by Anthony Polci, Special Assistant - Ontario, Office of the Minister of Transport]

Anthony Polci
Special Assistant - Ontario

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Attachment

May 23, 2000

Mr. Ross Snetsinger
Chair
Rail Ways to the Future Committee
247 Silverbirch Avenue
Toronto, Ontario
M4E 3L6

Dear Mr. Snetsinger:

Thank you for your letter of March 3, 2000, and enclosures, which are further to our previous exchange of correspondence regarding the retention of rail lines and the future of VIA Rail. I appreciate having the opportunity to comment further on this matter.

Under the National Transportation Act, the federal government subsidized the operation of uneconomic rail lines from the late 1960s to 1996. While these subsidies totaled hundreds of millions of dollars, they did little to stop the erosion of rail traffic on these lines. When it revised the legislation in 1996, the government ceased paying these subsidies.

One of the objectives of the revised legislation, the Canada Transportation Act, was to permit short line railways to take over rail lines that Canadian National and Canadian Pacific Railway wished to dispose of. If no short line operator was interested in the line, the municipal and provincial governments were to be offered the property before the railways could dismantle the line and sell the right-of-way.

There will be a statutory review of the Canada Transportation Act, which will begin by July 1, 2000. As part of this review, public input will be sought.

With respect to VIA, as you are likely aware, Minister Collenette announced on April 12, 2000, that the federal government would be providing VIA Rail with an additional $400 million in capital funding to address key pressures on its existing system. These funds would be targeted for spending to renew the system fleet, to modernize signalling on VIA-owned track, to make strategic infrastructure improvements in the Quebec City-Windsor corridor, to refurbish stations and to improve environmental waste management.

Thank you again for writing.

Yours sincerely,

[Original signed by Anthony Polci, Special Assistant - Ontario, Office of the Minister of Transport]

Anthony Polci
Special Assistant - Ontario

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Attachment

October 6, 2000

Mr. Ross Snetsinger
Chair
Rail Ways to the Future Committee
247 Silverbirch Avenue
Toronto, Ontario
M4E 3L6

Dear Mr. Snetsinger:

The office of the Right Honourable Jean Chrétien forwarded a copy of your letter of May 11, 2000, to the Honourable David M. Collenette, Minister of Transport, regarding the importance of rail transportation in Canada. The Minister has also received your letter of August 30, 2000, regarding the possible resumption of VIA Rail services to Barrie, and your suggestion that, should this service be reinstated, it include stops at Orillia and Casino Rama. Minister Collenette has asked me to reply on his behalf and I apologize for the delay.

When the current government came into power in 1993, it recognized that the financial performance of the nation's rail industry had been in a steady decline. Consequently, it undertook a rail renewal initiative which replaced the National Transportation Act, 1987, with the Canada Transportation Act. The changes resulted in the abolishment of rail freight subsidies, the privatization of Canadian National (CN) and the removal of some regulations on the railway industry.

With the enactment of the Canada Transportation Act in July 1996, the federal government did its part to ensure the preservation of rail service wherever it could be continued on a commercial basis. The Act was, in large measure, motivated by the government's desire to preserve as much rail infrastructure as possible, particularly by encouraging the creation of shortline railways without federal subsidy.

Since the enactment, 9,800 kilometres of low-density rail lines have been transferred by CN and Canadian Pacific Railway (CPR) to new owners, while only 1,800 kilometres have been discontinued. There are currently more than 60 shortline and regional railways in Canada, the majority of which were created since the passage of the Canadian Transportation Act.

For several years, the railway operators have expressed concerns relating to fuel taxes levied by both federal and provincial governments and municipal property taxes. They have also asked for more equitable treatment for Capital Cost Allowance comparable to that enjoyed by other modes of transportation. In recognition of this concern, one of the items included in this year's federal Budget was an increase in the Capital Cost Allowance from 10 to 15 percent to encourage investments in modem and efficient railway locomotives and rolling stock by allowing an investor to write-off such investments sooner.

The Budget also allocated $2.65 billion for an overall infrastructure program including $2 billion for municipal infrastructure. The Honourable Lucienne Robillard, President of the Treasury Board and Minister responsible for Infrastructure, is responsible for the municipal component which is called Infrastructure Canada. The primary focus of this program is on "green" infrastructure projects that will have direct and beneficial impact on the environment. Local transportation priorities, such as urban transit, will also be eligible for funding. The formal negotiation process on the municipal component is well under way.

You noted in your letter the small investment the federal government announced for VIA Rail. I should explain that, in addition to the over $400 million for capital spending over the next five years that the Minister announced earlier this year, the federal government will continue to provide VIA Rail with an annual operating subsidy of $170 million. As such, the total federal contribution for VIA Rail will exceed $1.25 billion over the next five years.

The $400 million in capital funding will be targeted for spending to renew the system fleet, to modernize signalling on VIA-owned track, to make strategic infrastructure improvements in the Quebec City-Windsor corridor, to refurbish stations and to improve environmental waste management practices. As part of this plan, Minister Collenette has also asked VIA Rail to look at the feasibility of restoring discontinued passenger services, such as the Toronto - Barrie and Toronto - Peterborough trains. Recognizing that VIA Rail's operating subsidy will not increase over the next five years, any decision to restore a service will have to be based on an appropriate business case and accomplished within VIA's existing budget.

Earlier this summer, Minister Collenette asked VIA Rail to prepare a commuter strategy for the Greater Toronto and Greater Montreal areas to complement the services offered by GO Transit and l'Agence métropolitaine de transport in Montreal. This strategy will examine extending existing services and increasing capacity in peak hours to carry commuters and will explore arrangements with GO Transit to offer seamless transfers, ticketing and pricing. It will verify if there is a business case for the restoration of services terminated ten years ago to Barrie and Peterborough, as well as possible summer and winter weekend peak services to relieve congestion on the highway system. The strategy will also examine the possibility of partnerships with municipalities and the provinces to assist the development of new services and enhancements of stations. VIA Rail is expected to submit its strategy for the Minister of Transport's consideration later this fall.

You may also be interested to know that earlier this summer, Minister Collenette announced the appointment of a panel to conduct a comprehensive review of the Canada Transportation Act beginning July 1, 2000.

The Act requires, within four years, a comprehensive review of the Act and any other act of Parliament for which the Minister of Transport is responsible, pertaining to the economic regulation of a mode of transportation and transportation activities under the legislative authority of Parliament. The final report of the panel must be submitted by July 1, 2001.

As the Minister noted in his announcement, "this review will assess whether the Act and related legislation provide Canadians with an efficient, effective, flexible and affordable transportation system. The review may also recommend amendments to the national policy and to the legislation where necessary or desirable.

Therefore, as you can observe from these various initiatives, the federal government is committed to maintaining and improving both passenger and freight rail operations in Canada as viable and competitive modes of transportation.

Thank you for your ongoing interest in transportation matters.

Yours sincerely,

[Original signed by Cameron Summers, Special Assistant - Ontario, Office of the Minister of Transport]

Cameron Summers
Special Assistant - Ontario

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Attachment

February 16, 2002

Mr. Ross Snetsinger
Chair
Rail Ways to the Future Committee
247 Silverbirch Avenue
Toronto, Ontario
M4E 3L6

Dear Mr. Snetsinger:

Thank you for your various letters, and enclosures, in which you express your concern over the discontinuance of the Canada Southern (CASO) railway. In addition, [name withheld], M.P.P., and [name withheld], M.P., wrote on your behalf and provided further information on the Rail Ways to the Future Committee and CASO.

As you know, in December 1984, the Railway Transport Committee of the Canadian Transport Commission issued a decision that allowed Canadian National (CN) and Canadian Pacific Railway (CPR) to purchase the CASO railway assets from Conrail, a U.S. company. Operation of the 150-mile Hewitt-Fargo segment was known to be uneconomical at the time of purchase. In the late 1970s, Conrail decided to stop using the Canadian routing as a bridge for its New York-Chicago service. Traffic was diverted to the Conrail track south of Lake Erie, which became the primary routing for the New York-Chicago corridor.

Recognizing that the 150-mile middle segment was uneconomic and, therefore, a candidate for abandonment, on April 2, 1985, the Governor in Council issued Order No. P.C. 1985-1102, Abandonment of Branch Lines Prohibition Order No. 25, which effectively prohibited the abandonment of the operation of the railway lines acquired by the CN/CPR partnership. This was in effect until the enactment of the Canada Transportation Act (CTA) in 1996. From 1988 to July 1, 1996, the federal government paid the CN/CPR partnership $1.2 million annually to compensate for losses incurred from the operation of the middle segment (Hewitt to St. Thomas).

Until January 1996, CSX, a U.S. rail company, was the only railway operating over the middle segment under a running rights agreement to bridge traffic between Buffalo and southwestern Ontario. CN and CPR designated most of the CASO line for transfer or discontinuance in their original 1996 three-year network rationalization plans. In compliance with the CTA, a notice of intent to sell the middle section of the line pursuant to the discontinuance process was advertised in December 1997.

An expression of interest for the line was received from an investment group shortly thereafter. However, it was unable to make a purchase offer to the CN/CPR partnership at that time. Despite a four-month extension, followed by a second extension to September 30, 1998, the potential buyer was still unable to develop a business case and to make a purchase offer. To date, the CN/CPR partnership has never received a formal purchase offer, even though there has been ample opportunity for interested parties to do so.

The CASO issue was subsequently put on hold by CN and CPR due to their involvement in regulatory proceedings in the United States concerning the approval of CN's acquisition of the Illinois Central, the discussions between the companies regarding the ownership of the Detroit River Railway Tunnel, rail merger-related activities in the United States and the CTA review.

It is important to note that there has been an overcapacity of rail trackage between the Fort Erie/Buffalo and Windsor/Detroit gateways for several decades. In 1997, CN abandoned most of its Cayuga subdivision, which ran parallel to the CASO between Welland and St. Thomas. A short segment near St. Thomas was sold to a shortline operator. During the past year, CN has single-tracked its corridor between Niagara Falls and Hamilton. CPR rerouted the trains that moved over the CASO through downtown Niagara Falls, to CN's line through Fort Erie for transborder access.

In the event that the CASO segment between Attercliffe and St. Thomas is not purchased, and if there are public interest reasons for preserving the corridor, under the Canada Transportation Act, the province and municipalities along the line will have the right to acquire it at net salvage value.

You have taken the appropriate action in expressing your interest to Mr. Francois Hebert of CN, on the behalf of the Rail Ways to the Future. The CN/CPR partnership has assured me that, despite the offer made to the government on November 23, 2001, it is willing to pursue a commercial sale of the line until February 2002, after which it will be in a legal position to discontinue the line.

I trust that the foregoing has clarified this matter. Thank you again for writing.

Yours sincerely,

[Original signed by David M. Collenette, Minister of Transport]

Hon. David M. Collenette, P.C., M.P.