City spearheads effort to keep short line railway beyond 2010
Published: October 16th 2009
Source: Northern Ontario Business

Supporters of a northeastern Ontario short line railway are laying the groundwork to keep a vital Sault Ste. Marie-to-Sudbury transportation link open past next year.

The City of Sault Ste. Marie is spearheading a regional effort to keep the Huron Central Railway operating beyond August, 2010 or find another carrier willing to service industry along the 300-kilometre long track.

A proposal call to select a short line operator will go out at the end of October with an assessment likely made by late January, said City of Sault Ste. Marie Chief Administrative Officer Joe Fratesi, who is chairing a special railroad working group of industry and community stakeholders.

“We have no guarantee that Huron Central will stay on past August of next year and we do however have an obligation to let (the railway) put their best foot forward on a long-term operation before we entertain other proposals.”

Fratesi said this competitive bid process may be pre-empted if a good offer comes forward from the Huron Central. “If they come up with a (good) arrangement, they likely could be seen as a preferred carrier.”

The city, Essar Steel Algoma, Domtar bought themselves a one-year reprieve last summer after striking a $15.9 million deal with the Montreal-based rail company to underwrite their operating costs until the agreement expires Aug. 15, 2010. The railway came within hours of dropping freight service to Sault Ste. Marie and Espanola.

The two companies have also committed an undisclosed volume of freight.

Key to the deal is the flow of $33 million in government infrastructure money to repair badly deteriorating track that has slowed transit times for freight and undermines Sault Ste. Marie's efforts to attract container cargo traffic.

Under government funding rules, Fratesi said there's no way all that money could be spent by March 2011, the date when these kinds of infrastructure stimulus projects must be completed. So only $12 million will be parceled out next spring for either the Huron Central or another railway operator to use.

The rest of $21 million will be spent over the next few years in a second round of infrastructure funding.

The Northern Ontario Heritage Fund is providing an immediate boost of $1.5 million to help repair ties, rails and bridges on the track. FedNor has promised to match that money.

“The stars all lined up for us because of the cooperation of everyone,” said Fratesi in mentioning the support of federal and provincial officials, small town mayors and the major shippers involved.

“We were very fortunate that people got serious about it early and who took action and some risk. But looking at the big picture, the risk is going to be seen as well worth it.”

Fratesi said for the rail line to succeed, it's incumbent on North Shore communities to do their part to generate additional rail freight business.

“The fact that communities between the Sault and Sudbury realized the possibility of losing their rail line has woken up a sleeping giant for them to go out and promote new business (opportunities).”

Fratesi said there are new developments along the North Shore being talked about and those mayors and economic development officials must promote the use of rail to ensure its success and keep excess transport trucks from rumbling through their towns.

Canadian Pacific Railway, the owners of the line, said last summer they had no intention of taking over operations and were prepared to file for abandonment.

Fratesi said during a September meeting in the Sault, CP officials were “impressed with what we were able to do and said that we have done everything that they could have expected us to do to turn their thinking around.”

He added CP must be part of the framing of the proposal call because no carrier is going to come forward without their commitment to be part of a solution. To help with the proposal call, Fratesi said the city has also retained two lawyers who are experts in salvaging short line railroads across Ontario.

The one-year reprieve was a relief to shippers like Boniferro Mill Works, a Sault Ste. Marie hardwood sawmill, which would have been adversely impacted if the railroad had pulled out.

Company president Jim Boniferro said the closure of that line would have been “devastating” to his 50-person operation if they had to replace rail cars with more expensive transport trucks.

The company harvests pulp wood for Domtar and sends between 1,100 and 1,200 rail cars east to their paper plant in Espanola.

“It was very critical to keep that line open,” said Boniferro in tabulating his costs to pay woodland contractors for logs and then passing on a more exorbitant freight bill to Domtar by shifting from rail to truck. “Domtar has a magic number to pay us for pulp.”

“If that Aug. 15 drop-dead date had come that we couldn't ship pulp, we would have been in a big pickle here. If you can't move pulp, you can't move saw logs. We would have had to come up with some sort of solution and quite frankly there was no Plan B at that point.

“I think the city did a tremendous job getting the stakeholders and getting Essar and Domtar involved.”

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