10
TRANSPORTATION INFRASTRUCTURE
Rail Transportation Infrastructure
In 1999, Canadian railways operated slightly less than 50,000
route-kilometres of track. This was a decline of less than
one per cent over the previous year, mainly as a result of
discontinuances. While the total extent of the system remained
essentially unchanged, the character of the industry continued
to evolve rapidly.
As illustrated in Table 10-1, CN's Canadian network was reduced
by over eight per cent during 1999, with its route-kilometres
dropping below 40 per cent of the industry total. CPR's network
also shrank, though by somewhat less, bringing its network to
less than 30 per cent of the total for all Canadian
railways.
In contrast to the decline in the Class INote 1 carrier network,
the Canadian shortline industry continued its pattern of strong
growth. In 1999, the regional and shortline network grew by just
over 12 per cent from 1998, and represented 30 per cent of the
entire Canadian rail network. With the completion of CN's and
CPR's most recent three-year rationalization plans, the regional/shortline
segment should account for over 35 per cent of the Canadian system,
while CN and CPR together should account for about 65 per cent,
but only when done.
Rationalization
Railway rationalization refers to the ways a railway/ carrier
can deal with track that is no longer economically viable. Typically,
the rationalization of the Canadian rail system has taken the
form of transfers of lines to other, smaller carriers, or through
the discontinuance of operations over certain lines, usually when
all other avenues have been explored. The principal consideration
behind rail rationalization is the need to reduce the costs of services
being offered.
In the case of line transfers, lines that are considered to
be marginally economical from a carrier perspective may be offered
for sale to another carrier to allow service over these lines
to continue. In practice, it is usually the Class I carriers,
CN and CPR, that offer lines for sale or lease to potential shortline
operators. Shortline operators generally have lower operating
costs than Class I carriers, mainly because of lower costs for
labour. Shortline operators also tend to improve the level of
service to shippers on their lines, which often improves their
overall revenue stream.
In addition to the transfer of lines to another carrier, occasionally
a Class I carrier will create an "internal" shortline
that simulates many of the features of an operation transferred
to another carrier. The objectives are the same -- to reduce costs
and improve the revenue stream -- but the assets remain the property
of the same Class I carrier. Typically, special agreements are
struck with labour to facilitate the development of these "internal"
shortlines.
Discontinuances represent another, though less frequent, form
of rationalization. Under the Canada Transportation Act,
1996, rail lines proposed for discontinuance must go through a
statutory process of first being offered for sale to potential
commercial operators, and, failing that, to levels of government.
Only after all opportunities for continued commercial operation
or transfers to governments have been exhausted, are railways
permitted to discontinue services over a line.
During 1999, approximately 82 per cent of the 2,062 kilometres
of track rationalized by CN and CPR were transferred to other
operators. Only about 378 kilometres of line were discontinued
in 1999, compared with 505 kilometres in 1998 and 955 kilometres
in 1997. As shown in Table 10-2, which illustrates rationalization
activity by province for 1999, CN had by far the greatest amount
of transfer activity, as well as the greatest amount of rationalization
activity in general.
In 1999, Alberta once again dominated rationalization activity,
with over 50 per cent of discontinuances and transfers. As in
1998, transfers accounted for the bulk of rationalization activity
in that province. During 1999, almost 55 per cent of line transfers
to other operators occurred in Alberta, while another 23 per cent
took place in Manitoba. The large amount of track transferred
in Alberta involved two carriers -- one an existing RaiLinkNote
2 operating division and the other, Alberta RailNet
Inc., a subsidiary of North American RailNet Inc. The higher proportion
of rationalization activity in western Canada (85 per cent
of all transfers and discontinuances) than in eastern Canada is
not surprising, given that until recently, the western Canadian
network was under an abandonment prohibition for many years.
While CN accounted for virtually all of the transfer activity
in 1999, discontinuances were roughly similar for both carriers.
Although the amount of trackage discontinued in 1999 was not large,
two thirds of it was in Saskatchewan. Figure 10-1 illustrates
the CN and CPR rationalization activity that occurred on the rail
network in 1999 and, where applicable, the names of the new
carriers to which the track was transferred.
The pace of rail line discontinuances continued to decline,
with 1999 being the third consecutive year in which the amount
of track discontinued fell. On the other hand, transfers continued
to occur at a strong rate.
Figure 10-2 charts these two methods of rationalization
in terms of cumulative activity over the past decade. During
this period, cumulative transfers to other rail operators surpassed
cumulative discontinuances of lines. The rate of transfers after
1996 was particularly dramatic.
Table 10-3 shows the provincial distribution of this rationalization
activity over the same ten-year period. Ontario has experienced
the greatest amount of rail line discontinuance with approximately
22 per cent of total Canadian trackage discontinued. Close
behind is Saskatchewan at 20 per cent. During this decade, 25 per cent
of all the track transferred to other operators occurred in Alberta,
while Manitoba, Ontario and Quebec each accounted for about 18
per cent. Ontario, Alberta and Quebec experienced similar amounts
of total rationalization activity, with approximately 18 per cent
of overall activity.
Three-Year Plans
Railways must make plans publicly available that indicate what
discontinuances and transfers they plan to undertake over a three-year
horizon. These plans are updated periodically. The most current
plans for CN and CPR are dated November 30, 1999, and December 18,
1999, respectively.
In the remainder of their current three-year plans, CN and
CPR have proposed to discontinue about 1,250 kilometres of
track, of which 55 per cent is in Saskatchewan and almost 40 per
cent is in Ontario. They have also proposed 1,150 kilometres
of track for transfer, with about 35 per cent of this total in
each of Ontario and Saskatchewan. Table 10-4 shows the amount
of track proposed for discontinuance and transfer in the balance
of the railways' current three-year plans.
In aggregate, approximately 45 per cent of all rationalization
activity proposed for the balance of the railways' current three-year
plans is expected to occur in Saskatchewan. A further 35 per cent
is proposed for Ontario. The remaining provinces have relatively
minor amounts of track to be rationalized and most of it is proposed
for transfer.
The amount of track operated by CN and CPR, relative to the
total network, has declined rapidly in recent years from a level
that had been more or less stable at approximately 90 per cent
for many years to less than 70 per cent now. It is expected
that with the completion of their current three-year plans,
CN and CPR will account for approximately 65 per cent of
the network, while shortline and regional railways will account
for the remainder.
Rail Transportation Infrastructure
- Appendix 10-1 Personal Expenditures
on Transportation, 1998
NOTES
1
Class I railways are generally defined to include CN and CPR,
as well as VIA Rail Canada. Class II railways include those known
variously as regional and shortline railways, while Class III
railways encompass those activities that are principally confined
to terminals or bridges.
2
In 1999, RaiLink was purchased by Rail America. For further details,
see the "Structure of Transportation Industry" chapter
of this report.
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