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Revitalizing New Brunswick's Rail Sector Report

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Revitalizing New Brunswick's Rail Sector Report Revitalizing New Brunswick’s Rail Sector By Greg Gormick for The Cites of Moncton, Dieppe, Bathurst and Miramichi The Town of Riverview Enterprise Greater Moncton December 30, 2013 ON THE COVER (Clockwise from top lef) First Intercolonial train into Dalhousie, New Brunswick, June 30, 1884 (Canada Science and Technology Museum CN Collecton, Image CN008379) VIA Rail Canada’s Oceans meet near Belmont, Nova Scota, August 13, 2005 (Photo by Alan Macek) Moncton-rebuilt VIA Rail Canada RDCs west of Jasper, Alberta, November 29, 2013 (Photo by Tim Stevens) CN container train crossing the Salmon River Bridge on the Napadogan Subdivision, 1974 (Canada Science and Technology Museum CN Collecton, Image CN000162) © 2013 by Greg Gormick and Transport Acton Atlantc Table of Contents Acknowledgments ............................................................................. iii Executive Summary ........................................................................... v 1.0 New Brunswick Railroading in Turmoil ...................................... 1 2.0 A New Brunswick Railway Primer .............................................. 3 2.1 The Pioneer Era ....................................................................... 3 2.2 Growth and Competition ......................................................... 5 2.3 The Great Canadian Railway Fiasco ......................................... 5 2.4 The CN Era .............................................................................. 7 2.5 The Maritime Railway Retreat ................................................. 8 2.6 CN’s Return ........................................................................... 13 3.0 The Case for Rail Investment .................................................... 15 2.1 The Benefits of Rail Freight Transportation ........................... 16 2.2 The Benefits of Rail Passenger Transportation ...................... 18 2.3 The Benefits of Short Line Railways ...................................... 22 4.0 CN’s Newcastle Subdivision Abandonment Application ............ 25 4.1 Current Infrastructural Condition ......................................... 25 4.2 Current Traffic and Service ................................................... 32 4.3 CN’s Position ......................................................................... 35 4.4 The Short Line Alternative .................................................... 38 4.4.1 U.S. Precedents ............................................................... 40 4.4.2 Canadian Precedents ...................................................... 42 4.5 The Short Line Options ......................................................... 46 4.5.1 Federal Ownership ......................................................... 47 4.5.2 Provincial Ownership ..................................................... 48 4.5.3 Joint Public Ownership .................................................. 49 4.6 Easing the Freight Car Shortage ............................................ 49 4.7 Funding ................................................................................. 51 i 5.0 VIA’s Ocean: Glorious Past, Murky Future ............................... 55 5.1 VIA’s Troubling Track Record ................................................ 64 5.1.1 National Rail Passenger Policy ........................................ 65 5.1.2 VIA’s Uncertain Funding ................................................. 66 5.1.3 VIA and Canada’s Freight Railways ................................. 68 5.1.4 The Long-Haul Issue ....................................................... 70 5.2 The Current VIA Crisis ........................................................... 71 5.3 VIA’s Untenable Fallback Position ......................................... 75 5.4 Service Enhancements .......................................................... 79 5.4.1 Frequency Increase ......................................................... 79 5.4.2 Fleet Upgrading .............................................................. 85 5.4.3 Fleet Renewal ................................................................. 91 5.4.4 Intermodal Integration .................................................. 96 5.4.5 Municipal Station Ownership ......................................... 99 5.5 VIA Managerial Renewal and Redirection ............................ 101 6.0 Enterprise Denied: Industrial Rail Services' Bankruptcy ....... 103 6.1 Consultant’s Disclosure ...................................................... 105 6.2 IRSI’s Track Record ............................................................ 106 6.3 The VIA Contracts ............................................................... 108 6.4 The LRC Factor ................................................................... 109 6.5 Execution of the VIA Contracts ............................................. 111 6.6 The Experience of Other VIA Suppliers ................................ 118 6.7 Reviving IRSI ....................................................................... 121 7.0 Conclusions and Recommendations ........................................ 125 7.1 Key Recommendations ......................................................... 127 7.1.1 CN’s Newcastle Subdivision ............................................ 127 7.1.2 VIA Rail Canada Passenger Service ............................... 128 7.1.3 Reviving Industrial Rail Services ................................... 129 7.2 A Critical Role for Municipalities ......................................... 129 7.2.1 CN’s Newcastle Subdivision ........................................... 130 7.2.2 VIA Rail Canada Passenger Service ................................ 131 7.2.3 Reviving Industrial Rail Services ...................................132 Attachment A: About the Consultant ...............................................133 Attachment B: Transport Action Request to the Auditor General .... 135 Attachment C: VIA Consultants’ Report on IRSI’s LRC Contract ...... 141 ii Acknowledgments Peer Reviewers Howard Easton Assistant Vice-President, Atlantic Region, Canadian National Railways (retired) David Gunn President, Amtrak (retired)/Adviser, Industrial Rail Services Editorial Adviser Ted Bartlett Vice-President, Transport Action Atlantic/Director, National Dream Renewed Contributors Chris Evers Vice-President, Industrial Rail Realty, Inc. Sean Finn Executive Vice-President, CN Steve Gallagher Operations Manager, Barrie Collingwood Railway/Orangeville Brampton Railway Roger Hoather Director, Capital Programs, VIA Rail Canada (retired)/Adviser, Industrial Rail Services Jeff MacTavish Director of Economic Development, City of Miramichi John Pearce President Emeritus, Transport Action Atlantic Doug Peters Vice-President, Cando Rail Services (retired) Scott Tidd Manager of Economic Development, City of Bathurst ... and many others within the railway industry who wish to remain anonymous. iii Special thanks to the photographers whose work has graphically enlivened this report: Ron Bouwhuis Steve Boyko Steve Bradley Andy Cassidy Richard Elgenson Ray Farand Bill Hakkarinen François Jolin John Leopard Alan Macek David Morris David Onadera David Othen Tim Stevens Robert Truett Stefan Wohlfahrt All photographs remain the copyrighted property of the photographers listed above. iv Executive Summary This report examines the issues that currently threaten large segments of New Brunswick‟s rail sector. In particular, three critical challenges arose in swift succession during 2012. They are: CN‟s announcement of the pending abandonment of 139 miles of the Newcastle Subdivision, the route of VIA‟s Ocean, between Moncton and Belledune; VIA Rail Canada‟s reduction in the frequency of the Montreal-Moncton-Halifax Ocean from six times weekly to three, effective October 2012; and The bankruptcy of the Moncton rail equipment remanufacturing firm, Industrial Rail Services, Inc., as a result of the cancellation of three VIA contracts totalling $117.3 million. The detailed analysis contained in this report explores the underlying causes of the problem, and suggests solutions and alternatives based on the experience of other jurisdictions in similar situations elsewhere in Canada and the U.S. Historical Background The era of main line railroading in New Brunswick began with the completion of the government-owned Intercolonial Railway of Canada (ICR) in 1876 between Halifax and Rivière-du-Loup, with a direct connection to the Grand Trunk route to Montreal, Toronto and southwestern Ontario. Today‟s CN Newcastle Subdivision is part of this through route. CN owns and operates a second line through New Brunswick, also originally built as a public enterprise. The National Transcontinental Railway (NTR) between Moncton and Quebec via Edmundston opened in 1913, and over time became the principal freight route linking the Maritimes with central Canada, while the ICR remained the main passenger line. Canadian National Railways was formally constituted as a Crown corporation in 1922 to consolidate several bankrupt private sector lines and the federal government‟s own rail operations. The company was privatized in 1995, in a process initiated under the Mulroney Progressive Conservative Government and completed by the Chrétien Liberal administration. As the traditional resource and manufacturing industries in Atlantic Canada declined, so did the CN route network, with 52 per cent disappearing in the 1980s and „90s. The Newcastle Subdivision lost much traffic through the closure of paper mills at Miramichi, Bathurst and Dalhousie,
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