SPECIAL REPORT: SHIFTING TRACKS

SMALL IS BEAUTIFUL

Short-line railways are expanding as the major railways retreat

TOM FENNELL April 18 1994
SPECIAL REPORT: SHIFTING TRACKS

SMALL IS BEAUTIFUL

Short-line railways are expanding as the major railways retreat

TOM FENNELL April 18 1994

SMALL IS BEAUTIFUL

SPECIAL REPORT: SHIFTING TRACKS

Short-line railways are expanding as the major railways retreat

TOM FENNELL

Locomotive engineer Brad Jolliffe has a soft spot for the grimy diesel engine throbbing behind him. “This one was built in 1960,” he says, as the train rumbles across a muddy farm field in southwestern Ontario. “But it still does the job.” Like most engineers, Jolliffe, 36, who works for the tiny GoderichExeter Railway (GEXR), enjoys his local status: he waves back to children along the line and nods to drivers waiting patiently at crossings. But while Jolliffe, dressed in blue coveralls and a red checkered shirt, may resemble his colleagues in the engineering fraternity across the country, he is actually at the forefront of a z new form of railroading 3 called short-lining. As the 1 two national railways cut| back, short-liners are buying 5 chunks of marginally profs itable rail line and are man-u aging to tum a healthy profit where CN North America and CP Rail System have failed. In fact, business has been so strong that GEXR— based 100 km northwest of London, Ont., in Goderich—recently took delivery of a fourth locomotive. ‘This is what railroading is all about,” says Jolliffe, bringing his train into the station.

Since 1980, when Washington deregulated railways and thousands of kilometres of track were either sold off or abandoned, short-lining has boomed south of the border. More than 500 short-liners are now hauling freight from customers along their limited routes, feeding into the major rail system. Now, as CN and CP merge their operations in Eastern Canada and divest marginally profitable lines, the opportunities to create such niche-market railways are expected to expand in Canada as well. If the U.S. experience is duplicated, hundreds of communities and remote industries across Canada could end up retaining their crucial links to the national rail system through such services. Said Paul Tellier, CN president and chief executive officer: “The big advantage of short-lining is that we can tell local communities and shippers that they are not going to lose their track.”

The first of Canada’s eight modern short-

so paid $20 million for 400 km of CN line running from Truro in central Nova Scotia to Sydney, and in October, 1993, it launched the Cape Breton & Central Nova Scotia railway on that route.

CN is currently trying to sell five pieces of track in Ontario to short-line operators and CP is also looking for a short-liner to take over 650 km of track running from Sherbrooke, Que., to Saint John, N.B. Given the vast distances involved, more regional railways may also emerge as CN and CP pull back. CN negotiators are currently trying to assist a group of employees in carving a regional operation out of CN’s sprawling rail network in Quebec.

According to RailTex founder and president Bruce Flohr, short-lining has brought railroading full circle to the turn of century when dozens of small, independent railways flourished in Canada. In fact, the Goderich area was originally served by the Goderich and Buffalo Railway, founded in 1853. “The big railways have gotten so big that they have lost focus on the little shipper,” says Flohr. ‘We’re getting back to focusing on the

SUPERINTENDENT’S OFFICE,

BRANTFORD, O. W.

PRESIDENT-ED. WATKIN, M.P., ENGLAND.

MANAGING Director—-O. J. BRYDGES, MONTREAL. SDircctora:

PHILIP RAWSON, Liverpool, Eng, J ALEX. McEWEN, Olatgou, Scotland, CHARLES LANGTON, “ j ALFRED DIGBY, Brantford, C. W.

CHAULES HOLLAND, « j ALLEN CLEGHOBN, “ “

MAXWELL HYSLOP, « " {

THE BUFFALO & GODERICH DIVISION

OF THE GRAND TRUNK RAILWAY,

Extends from BUFFALO, in the State of New York, to GtODEBXCH, on Lake Huron, Canada West, connecting with the Main Line at Stratford; and at Caledonia, with a line of Stages to Hamilton.

During the season of Lake Navigation, there is direct connection with SAGINAW, CHICAGO, MILWAUKEE, and intermediate Porte, from the Goderich. Terminos, by means of FIRST-CLASS PROPELLERS, sailing tri weekly.

The Road Is 161 miles in length, and in good running order. Passsengers from Buffalo to Detroit, via Stratford and Sarnia, connect with all linea going West, with as little delay as by any other route.

J. F. BARNARD, Superintendent. THOS. SHOUT, C. ,1. BRYDGES, .#1«. JHrtdor.

. Secretar*/, J¿ondon¡ England.

line railways was created in 1986 when the Central Western Railway, based in Stettler, Alta., was launched on 106 km of abandoned CP track. In April, 1992, interest in short-lining in Canada increased sharply when RailTex Inc. of San Antonio, Tex., a fast-growing U.S. short-liner, paid $4 million for 112 km of line that GEXR now operates. RailTex, which operates 23 short-line railways in the U.S., al-

■ SPECIAL REPORT: SHIFTING TRACKS

smaller communities and smaller shippers.” That refocusing has already improved rail service to Goderich and the surrounding communities. When GEXR general manager Arlene Parker arrived at the century-old train station in 1992, having left an administrative job with CN, much of the building was boarded up. Today, the station is completely opened, with eight employees overseeing the comings and goings of GEXR’s four green and tan locomotives. The station has become so busy, says Parker, “that people actually phone

thinking that there is passenger service.”

In fact, the railway has generated so much new business that the town’s port-side grain elevators on Lake Huron had to be expanded to accommodate the increased traffic. The number of freight cars handled by the railway has jumped from 500 to 1,000 over the past 12 months.

In addition to increasing rail traffic, GEXR has been able to make a profit by operating a lower-cost railway. Unlike the unionized national rail companies, where tasks are rigidly defined, short lines require that everyone from the office supervisor to train crews must be able to operate a locomotive or change a railway tie. Most of GEXR’s workers—called “transportation specialists”—earn roughly $14 an hour plus overtime plus a share of GEXR’s earnings through a profit-sharing program. While a senior engineer with CP would earn as much as $70,000 annually, Jolliffe, formerly with CP, says that he will likely make more than $50,000 this year with overtime pay.

Short-liners, who are non-union, also employ far fewer workers to cover the same ground as the major national railway opera-

tors. Mark Westerfield, general manager of the Cape Breton & Central Nova Scotia Railway, said that his railway is now employing 50 people on the same line that CN employed 115 workers to operate. As a result, Westerfield said that the railway is able to make money hauling freight on which the major railways would have taken a loss. He added that the short line is even beginning to make money hauling pulp and lumber—commodities that CN had all but given up on moving.

The short-liners also have another advan-

tage: their employees appear to love working for a smaller railroad. Out of affection for their aging locomotives, GEXR’s crews named them Titania, Portia and Falstaff—all characters from Shakespeare, in a reference to the nearby Stratford Festival. As well, all GEXR employees have been given a business card and are encouraged to drum up sales from potential shippers. “We may not have the newest equipment,” said Parker. “But we know how to run a railway.”

Despite his success at Goderich, however, Flohr says that his subsequent attempts to purchase more track in Ontario have been stymied by new labor legislation in Ontario. In 1992, the Ontario legislature passed Bill C-40, which requires companies buying an existing firm to honor union contracts signed prior to the purchase. But Flohr, who acquired GEXR prior to the passage of C-40, feels it is virtually impossible for most short-line operators to eam a profit if they are required to match the wages and benefits paid by CN and CP.

Last year, CN tried to sell five different sections of track in Ontario to short-liners, but the firms bidding on the line ultimately with-

drew over the question of inherited contracts or so-called successor rights. Tellier met with Ontario Premier Bob Rae in January to discuss the issue, but says he was unable to resolve the impasse. For its part, the provincial government maintains that under Bill C-40, short-liners can appeal to the Ontario Labor Board to alter existing contracts. But an official with the Ontario Ministry of Labor said that the government has no plans to totally exempt short-liners from C-40 in the future. And in the end, that may force CN to abandon a number of lines in Ontario. “It’s a sad situation in Ontario because it is forcing us to file for abandonment,” said Tellier. “Successor rights are a major impediment to the rationalization of the network in Ontario.” Short-liners trying to buy abandoned lines in Canada also face a lengthy approval process, often including an environmental assessment. In the United States, by comparison, the sale of a railway can be completed in roughly 30 days. According to Flohr, it took 14 months to finalize his purchase of the GEXR line. However, he added that when he met with Transport and Employment officials in Ottawa last month, they seemed more aware of the importance ^ of short-lining and of simplify1 ing the acquisition process. But S Flohr also said that Bill C-40 I notwithstanding, the govern| ment of Ontario has yet to de5 velop a policy on short-lining I that acknowledges the imporu tant role that the small railways could play in the province. “Some time, Ontario is going to have to do something,” said Flohr, “because there will be lots of lines going over to short-line railways.”

Railway unions, however, remain strongly opposed to the proliferation of short-liners. Theo Stol, vice-president of the Canadian Brotherhood of Rail Transport and General Workers, said that CN and CP are deliberately trying to create short lines because they want to break the railway unions. He predicts that eventually the government will be forced to bail out the small railways because they will prove to be uneconomical. “Once the railways reduce the workers’ standard of living,” said Stol, “the railways will buy them back again.” Stol also questioned whether the short-liners would be able to serve remote parts of the country. And he said that he doubted if shortliners could make enough money to survive on CN’s more remote routes. “Eventually when these little railways cannot survive, a bigger network will be required,” said Stol. “We need the CN to stay in existence.” But with thousands of kilometres of track coming open, the short-liners appear determined to succeed where the big railroaders failed.

TOM FENNELL in Goderich