HALIFAX, N.S. — A 160-kilometre stretch of money-losing rail line in Cape Breton has become a symbol of the area’s economic woes and its hopes for the future, the Globe and Mail reported.
Earlier this month, the Cape Breton and Central Nova Scotia Railway — a division of RailAmerica Inc. — received permission from a provincial tribunal to shut down the section of its rail line that links industrial Cape Breton with the mainland.
The closing, scheduled for next April, is the latest economic blow for an area that has the third-highest unemployment rate in Canada and is struggling to replace the almost 2,000 jobs that were lost over the past two years when the federal government shut down the Devco coal mines and the province closed the Sydney steel mill.
Business leaders and politicians in Cape Breton insist that they’re caught in a quandary. The present economy, where the major employers are governments and call centres, can’t support the railway. At the same time, Cape Bretoners fear that they won’t be able to revive the economy by attracting new companies, particularly those seeking opportunities in offshore oil and gas ventures, unless they have a railway to haul the heavy freight.
The railway predicament has also left the Nova Scotia government — long accused of ignoring economically depressed Cape Breton — in a difficult position.
The Tory administration unsuccessfully opposed the railway closing, and Nova Scotia Economic Development Minister Cecil Clarke and Premier John Hamm have both said they are looking for ways to keep the trains running.
But after the bitter and heart-wrenching recent closings of federally owned coal mines and a provincially owned steel mill, Mr. Clarke insisted the province won’t be hauling freight — but it will look for another operator for the line. Mr. Clarke said last week that if RailAmerica, based in Boca Raton, Fla., shuts down the line, the province will look at buying it for net scrap value — rumoured to be about $7-million — and then look for a purchaser. But some business people in Cape Breton fear that if the line were actually scrapped, it would be too expensive to lay new track.
“It may be costing money [to operate the line] now, but if you scrap it now and had to re-establish it later, the cost would be prohibitive,” said Steve Farrell, a partner in Laurentian Energy Corp., a consortium of local business people developing an industrial park to manufacture equipment for the offshore energy industry.
The rationale for closing the short line, which was purchased from Canadian National Railway Co. in 1993, is brutally obvious. Traffic on the line, which in 1995 carried 13,000 carloads of steel, coal and other goods, slowed to only 800 cars last year after the steel mill and coal mines closed. The railway said in a presentation to the Nova Scotia Utilities and Review Board that it was losing $40,000 a month operating the line.
“It’s all been like a house of cards,” Mr. Farrell said, adding that there are only about a dozen Cape Breton companies left using the line. “Once the steel mill closed and the coal mines closed that was most of the traffic on the line.”
Laurentian Energy recently began building facilities at the Sydport Industrial Park to manufacture equipment for offshore oil and gas projects in the Laurentian Basin, halfway between Newfoundland and Nova Scotia. Exploration in that area is expected to start next summer. But the manufacturing opportunities would be limited, without a rail line to move heavy freight, he said.
Mr. Farrell said the railway is also needed to encourage mining companies to look at the possibility of extracting coal from the reserves still left in Cape Breton. He said the province should be doing everything possible to promote the development of the abandoned coal fields.
Cape Breton Mayor John Morgan said the region and the provincial government have to work together to develop a business case for someone taking over the rail line.
“They [the provincial government] have been considering the purchase of the property and selling it to another buyer and that is potentially positive,” he said. “But thus far there has been nothing concrete. To get another buyer you have to have more traffic on that line.”
Peter O’Brien, Atlantic director of the Canadian Federation of Independent Business, said that the railway is essential to the economic future of Cape Breton. He said the development of Sydney as an offshore petroleum service centre for the Laurentian Basin and other fields closer to shore depends on companies having a rail line to move goods.
“There is a real potential for developing offshore resources. Sydney is the closest port to the Laurentian Basin, so over time I believe that a railway can be quite feasible,” Mr. O’Brien said in an interview.
Mr. Clarke has promised that a market analysis of the need for the railway will be completed by the end of January. That would mean that an announcement on the future of the line would be made as the province is preparing for an election. Mr. O’Brien said it would make sense for the province to purchase the railway for scrap value and sell it to an operator.
“My sense is that they [the provincial government] may well have something in mind,” Mr. O’Brien said. “The minister says he’ll have an answer by the middle of January and that’s pretty quick. There’s something on the horizon because you wouldn’t do this politically with an election coming up next year — raise hopes and then dash them.”