April 15, 1965 Judgments, orders, regulations and rulings (Ottawa)

In the matter of the application of the Canadian National Railway Company for an Order authorizing it to abandon that part of its Alvinston Subdivision between Glencoe (mile 0.28) and Alvinston (mile 10.74), a total distance of 10.46 miles, all in the Province of Ontario.

Before:
H.H. Griffin, Assistant Chief Commissioner.
J.M. Woodard, Commissioner.
Appearances:
H.J.G. Pye, for Canadian National Railways.
R.D. Steele, Q.C., for the Village of Alvinston and Township of Brooke.
J.D. Gillies, Councillor, Township of Mosa.
George N. McCallum, in person.

22586.1

April 15, 1965.

Heard at: London, Ontario, on January 21st and 22nd, 1965.

Judgment

Woodard, C.

On May 1, 1963, the Canadian National Railways hereinafter referred to as the Company, applied to the Board for an Order granting it leave to abandon the operation of its Alvinston Subdivision from Glencoe (mile 0.28) to Alvinston (mile 10.74), a total distance of 10.46 miles.

Inspections of the line in question were carried out by members of the Board's Engineering and Operating staffs, and following objections to the application from Steele and Magee, Solicitors for the Village of Alvinston and the Township of Brooke, and from the Inwood Co-Operative Limited, the application was set down for hearing. This hearing was held in London, Ontario, on January 21st and 22nd, 1965.

Description of Line:

The Alvinston Subdivision extends from its junction with the Chatham Subdivision at Glencoe to the end of steel at Alvinston. The line runs through fairly flat farming lands devoted principally to the growing of grain, soya beans and sugar beets. Alvinston, the shipping point for these commodities and an agency point, is the only village on the line, with a population of approximately 650.

The line was constructed in 1891 by the Grand Trunk Railway of Canada and was constructed through Alvinston to Kingscourt, thus connecting their Windsor and Sarnia branches. The portion of this line from Alvinston to Kingscourt was abandoned in 1940, under authority of Board Order No. 58827.

The condition of the line is generally poor with train speeds limited to 20 miles per hour and weight restrictions limiting engines to 1200 series diesel locomotives. There are two steel bridges on the line, one, the Bear Creek Viaduct M.P. 6.94, 706 feet in length with a 5 m.p.h. train speed restriction, and the other, 65 feet long, located at M.P. 10.39, with a 10 m.p.h. speed restriction.

Train service is provided by the St. Thomas-Windsor way-freight on an as required basis. This train service provides service for carload traffic only. All Railway L.C.L. and Express service to Alvinston is provided by a contract highway carrier from Glencoe. Alvinston is located at the junction of Provincial Highway No. 79, running north from Bothwell through Alvinston to Watford and beyond, and Provincial Highway No. 80, running east from Alvinston and down to Glencoe and thence to connect with Provincial Highway No. 2.

Alternative Stations:

The nearest rail stations which could serve as alternative shipping points for the Alvinston area in the event of abandonment are as follows:

C.N. station at Glencoe 12 miles southeast of Alvinston via Highway No. 80.
C.P. station at Glencoe 10 miles southeast of Alvinston via Highway No. 80.
C.N. station at Watford 9 miles north of Alvinston via Highway No. 79.
C.N. station at Bothwell 15 miles south of Alvinston via Highway No. 79.

Effect on Employees:

Should the line be abandoned the agency at Alvinston would be closed. The incumbent agent is due for retirement in April this year. The track patrolman on this line, who is classed as section foreman, would exercise his seniority elsewhere.

No other section forces are employed. Train crews would not be affected as the work involved on this line is only a small part of the work of the St. Thomas-Windsor way-freight.

Financial Position of the Company:

The evidence in respect of the Company's financial position presented at the hearing of this case followed the pattern of the case which had been heard in Woodstock on the two preceding days. Our Judgment in that previous case made reference to evidence presented in this case and it dealt at some length with the subject of Maintenance of Way and Structures, including depreciation on road property. I will not repeat all that was said on this matter, but I will refer later herein to reductions in expense which the Board made for purposes of that Judgment.

In order to determine the freight revenue earned on the Alvinston Subdivision the Company compiled the total of all freight charges over Company lines in Canada for traffic to and from Alvinston during 1963. They also compiled the number of carloads in and out of Alvinston by type of commodity and summarized this information in Exhibit No. 10, which is reproduced hereunder.

10

Canadian National Railways
London Area Great Lakes Region
Proposed abandonment of the Alvinston Subdivision
from Glencoe (M.P. 0.28) to Alvinston (M.P. 10.74)
Year — 1963
Statement No. 4A
Carload commodities and revenues
Station Cars Commodity Revenue
In Out
Alvinston 49 Sugar Beets 3,161
31 Soya Beans 11,310
42 Grain 11,215
5 Crushed Stone 368
12 Coal 1,503
1 Lumber 332
3 Soya Bean Meal 244
3 Oyster Shells 307
4 Shavings 630
1 Posts 283
6 Combines 398
3 Engines & Parts 1,582
1 Poultry Feed 412
1 Ammonium Nitrate 229
40 122 31,974
Total 40 122 31,974

October 30, 1964.

The system carload freight revenue of $31,974 represents the freight charges not only for the 10.74 miles on the branch line, but also for the much longer mileage off-line from and to the stations of origin and destination. The variable cost of the off-line movement was estimated to be $14,849, the details of which were shown in Exhibit No. 16.

16

Canadian National Railways
London Area Great Lakes Region
Proposed abandonment of the Alvinston Subdivision
from Glencoe (M.P. 0.28) to Alvinston (M.P. 10.74)
Year — 1963
Statement No. 7A (Revised)
Analysis of variable expenses
Expense Category Amount
On-Line Off-Line
Equipment maintenance
Cars 91 1,042
Locomotives 259 520
Superintendence 22 106
Ownership and Maintenance — Shops, Enginehouses 39 181
Transportation
Wages —Train Crews 1,111 1,281
—Yard Crews 1,974
—Yard and station employees 724
Train Control 244 119
Superintendence 248 287
Fuel 86 534
Supplies 289 1,301
Equipment ownership and rental
Depreciation —Cars 7 709
—Locomotives 365 480
Cost of Money —Cars 8 794
—Locomotives 233 336
Rental —Cars 674
Way and structures
Maintenance 812
Superintendence 115
Depreciation 282
Cost of Money 582
Work Equipment — Ownership and Maintenance 48
Other expenses
Pensions 163 589
Unemployment Insurance 20 72
Sales 242
Freight Claims 324
Express-Freight Handling
Communications 53 213
O.C.S. 24 136
General 93 372
3,345 114,849
Total variable cost 18,194

15 December, 1964.

If the total carload freight revenues of $31,974 plus miscellaneous revenues of $884 from telegrams, money orders and letters is reduced by the variable cost of the off-line movement, there is left an amount of $18,009 to apply against on-line expenses. These on-line expenses in 1963 were estimated to be $35,412 as shown in Exhibit No. 17.

17

Canadian National Railways
London Area Great Lakes Region
Proposed abandonment of the Alvinston Subdivision
from Glencoe (M.P. 0.28) to Alvinston (M.P. 10.74)
Year — 1963
Statement No. 8A (Revised)
Summary of Revenue and Expenses
System revenues
Freight — Carload 31,974
Freight — L.C.L.
Express
Passenger
Miscellaneous 884
Total revenues 32,858
System avoidable expenses
Fixed On-Line
Maintenance of Way & Structure 7,639
Indirect — M. of W. 1,408
Depreciation Road Property 15,817
Station and General
Property Taxes 999
Variable On-Line 3,345
Total on-line $35,412
Variable Off-Line 14,849
Total avoidable expenses 50,261
Annual operating loss 17,043
Annual Net Salvage Value
(6.23% of $47,700) 2,972
Annual financial improvement 20,375
Additional expenses if line
retained
Maintenance of Way & Structures 15,076
Average Annual Net Depreciated Cost
of Replacement — 6.23% of
(1/2×$644,600)
20,079
Annual Salvage Value
6.23% of ($76,500 - $47,700)
1,794
Total additional expenses 36,949
Annual long term betterment 57,324

December 28, 1964.

The above summary of revenues and expenses shows an annual operating loss of $17,403 which the Company estimated could be avoided if the line were abandoned. It also shows that the Company could salvage track materials which, at 6.23 per cent, would have an annual value of $2,972 making, a total annual financial improvement estimated to be $20,375.

During the hearing the Company was able to submit a record of the carloads of revenue freight by commodities for the year 1964, the total being 351 (later revised to 354) vis-a-vis 162 carloads in 1963. It was stated in evidence that there was some recovery in the sugar beet business from 1963. Reference was also made to 156 (revised to 157) carloads of pipe required by the Union Gas Company for looping their pipeline. Two cars of machinery were also attributable to the Union Gas movement. The witness stated that this was non-recurring traffic.

At the time of the hearing the full 1964 records required to compute the revenues and estimate the expenses for 1964 were not available. The Board requested the Company to submit these as soon as they could be prepared after the hearing. The 1964 figures showed revenues of $68,834, estimated expenses of $72,730, and an operating loss of $3,896. While this operating loss is less than the 1963 loss, it is mainly due to the non-recurring pipe revenue, and for purposes of this Judgment, I will use the 1963 operating results which were the subject of evidence and examination during the hearing.

The first item to which cross-examination was directed was cost of money. The rate of 6.23 per cent, which included an allowance for income tax, was stated to be the 1963 cost of money to the C.N.R. While the investment in road property is partly sunk in the branch line in the event of abandonment, some of the track materials may be salvaged for sale or for re-use elsewhere on the system. The gross value of such salvage less the cost of salvaging has been considered by the Board in past cases in determining the financial improvement contingent on abandonment. We have allowed an interest rate of 5 per cent on net salvage, which rate I will use in this case in lieu of 6.23 per cent. This results in a reduction of about $600 in the annual value of the net salvage.

I will also make a reduction in the estimate of $1,408 which appears in Exhibit No. 17 for indirect Maintenance of Way and Structures. Mr. White, who testified in respect of this Exhibit, said that the item represented allowances for Superintendence, General and Communications Expense. There could be some saving in this item if the branch line were abandoned, but I am not satisfied that it would be as much as $1,408. For purposes of this Judgment I will make a reduction in this estimate of $900.

The evidence and cross-examination on depreciation of road property was extensive. It brought out the fact that the Company had calculated depreciation on replacement of the depreciable materials in the line at today's prices. The following exchange took place between Mr. White and the Assistant Chief Commissioner:

THE WITNESS: And in lieu of having historic data on the cost of building this line when it was first built and having valid figures going back that far, we have developed an investment cost on the replacement at today's prices.

THE ASSISTANT CHIEF: I realize that.

THE WITNESS: Which is the figure which we are working to.

THE ASSISTANT CHIEF: Q. And historic cost might be greatly different, but you say you have not got historic costs?

A. We have not got the historic cost.

Q. And therefore you endeavoured to establish a replacement cost?

A. Yes, sir, which takes the place of that historic cost. We have also on one or two occasions established on the basis of the materials in the track today and where we know some of the historic costs, through a lot of digging and through a lot of effort, we have been able to find some of these things, and I might say the difference between what we have used as a replacement cost and what the historic cost was on those we could develop, there was so little difference that we felt this was a reasonable method of arriving at investment on which to base depreciation.

Since the hearing of this case, the Board's Accounting Staff has examined the Company records, and a comparison has been made between depreciation figures based on the present day replacement cost of depreciable track elements and depreciation figures based on the historic cost where such costs were known or where they had been estimated and shown on retirement authorizations. This examination has shown that the method of calculating road property depreciation based on present day replacement costs of depreciable track elements, even when grading and track laying and surfacing are excluded, can result in an overstatement of depreciation vis-a-vis the use of historic cost figures. For the purpose of the Judgment in this case I will reduce by one-third the estimate of depreciation on road property, i.e., I will reduce the estimate by $5,300.

The Company, in addition to indirect maintenance of way, included allowances for overhead in other items of expense. These allowances totalled some $5,500, which I have reduced by $2,100 for purposes of this Judgment.

The total of the aforenoted reductions in operating expenses is $8,300 which will reduce the annual operating loss to $9,103. In the case of net salvage the reduction in the rate reduces the annual value of net salvage to $2,372. The revised financial improvement is $11,475, or about $1,100 per mile of line, which I will weigh against the loss and inconvenience to the public.

The Company also presented evidence to show the additional annual expenses that would be incurred if the line were retained. These items, which appeared at the bottom of Exhibit No. 17, included $15,076 for Maintenance of Way and Structures, $20,079 as the Average Annual Net Depreciated Cost of Replacement, and $1,794 as the Annual Salvage Value. The Board has not based its Judgment upon the latter items in previous abandonment cases, and I will not do so in this case.

The first item of $15,076, or some $1,400 per mile of line, represents deferred maintenance, the evidence being that normal Maintenance of Way and Structures on this line would be about $22,700 per annum of which only $7,639 was performed in 1963. It is true that considerable additional annual maintenance would be required if the line were retained, but I am not satisfied, from the evidence, that it would require an additional annual expenditure of $1,400 per mile considering the traffic handled and the nature of the operation.

I have previously indicated that I will weigh the potential financial improvement of $1,100 per mile against the loss and inconvenience to the public if abandonment is authorized. Only if such loss and inconvenience appeared to offset the financial improvement would I give particular weight to the additional expenses involved in continuing the line in operation.

In addition to the evidence submitted on the financial position of the Company in regard to the operation of the line, the Company, through its witness, C.J. Morris, Manager of the London area, made a firm commitment to relocate beet-loading facilities now at Alvinston to the nearest adjacent station, either Watford or Glencoe, if such a move were desired by shippers. Mr. Morris further stated that the Company was prepared to construct a ramp at Watford for unloading farm equipment moving into the area. Both these undertakings would be at no cost to the shippers or users of the facilities.

A later witness, Mr. White, gave evidence on the feasibility of transporting the sugar beet crop, (which incidentally all moves to the Canada and Dominion Sugar Company plant at Chatham), by highway tractor-trailer trucks. It was his submission that, with the use of gasoline tractors and covered hopper, back-door- dump trailers, the haulage costs could be as low as 6 cents per hundred weight as compared to the present rail rate of 6.7 cents per hundred weight.

With respect to soya bean traffic, a large part of which moves between Alvinston and Toronto, it was Mr. White's submission that using the same type of vehicle the truck haulage costs would be 24.8 cents per hundred weight as compared to the present rail rate of cents per hundred weight. In his opinion, similar rates would result in moving barley between Alvinston and Toronto and wheat between Alvinston and Port Colborne.

Mr. White further stated that, on the basis of the use of a farmer-owned truck of 3-ton capacity, the additional cost of transporting sugar beets to railhead at Watford would amount to 1.8 cents per hundred weight.

To sum up the position of the Company, it was that on the basis of the losses shown in operating the line, the commitments made regarding the relocation of the beet loader and the construction of an unloading ramp, and the feasibility of the suggestions for alternative handling of farm produce, public inconvenience would not outweigh the burden that continued operation of the line would impose against the Company.

Opposition to the Application:

R.D. Steele, Q.C., appearing for the Village of Alvinston and the Township of Brooke, called as his first witness Mr. B.E. Easton, Agricultural Superintendent of the Canada and Dominion Sugar Company Limited, whose plant at Chatham receives the sugar beet crop from the Alvinston area. Mr. Easton outlined in some detail the methods by which farm acreage for the production of sugar beets was contracted for by his Company, and the manner in which the sugar beets were scaled and loaded for delivery and handled at the unloading point at the Chatham plant.

It was Mr. Easton's considered opinion that the Company's suggestion of handling sugar beets by tractor-trailer was not possible because of the physical setups of both loading and unloading facilities being used at present. He further stated that as most farmers in the area used farm tractors and wagons to haul their beets to the loader, they showed little interest in a further haul of 9 miles or so, should the loader be moved to Watford. He cited the situation that had developed when the loader at Glencoe had been removed in 1958. In that case, farmers had ceased to grow sugar beets, rather than be faced with the expense of a longer haul. A survey he had made in the area indicated that if Alvinston were closed as a loading point his Company would lose all but five farmers as customers, as compared to thirty-one farmers for the year 1964.

Mr. Easton, in referring to the cost of trucking to Chatham, cited an instance last fall where two farmers had had to truck their beets to Chatham at a cost of $3.00 a ton. This was later corroborated by one of the farmers involved. This later witness also stated that most farmers would have to hire trucks to haul beets to any point other than Alvinston at a cost that could run as high as an additional two dollars per ton.

Evidence was given by another witness, a dealer in farm machinery, that the prospects were that in the year 1965 he expected to about triple the number of carloads he has received at Alvinston in past years, averaging about 5 a year, if the line should remain. In the event of abandonment, his costs and consequently the cost to the farmer would increase. Speaking as a member of the St. Clair Regional Development Board, he referred to the prospect of an industry establishing in the Alvinston area that could eventually employ as many as 200 people. However, as this was just a possibility and not a definite commitment on the part of the company concerned, his evidence was rather vague and nebulous.

Mr. Steele's last witness, Mr. W.D. MacDougall, Manager of the Inwood Co-Op, described the operation of the Co-Operative, which had in the past two years established a branch in Alvinston. His evidence was that rail rates from Alvinston to the various destinations for soya beans, wheat and barley, were slightly lower than the published truck rates and to remain competitive with Glencoe, Watford, Bothwell and Petrolia without a rail shipping point, the Co-Operative's profit would be less. He added that the export market for soya beans varied from time to time, and at certain times a rail shipping point put the Cooperative in a more advantageous position than would be the case if shipping had to be done by truck. He admitted that due to the small storage capacity of the plant at Alvinston it was the practice to load directly into the box cars, and that if the line should be abandoned, the Co-Operative would be required to greatly increase storage facilities at considerable cost. On cross-examination, Mr. MacDougall admitted that the branch of the Inwood Co-Operative at Inwood was considerably larger and operated to the advantage of the farmer members, even though Inwood was not a rail shipping point and highway transport was used exclusively.

Referring for a moment to Mr. White's testimony regarding the use of tractor-covered hopper trailer units to transport sugar beets, Mr. White admitted under cross-examination that he knew of nowhere in Ontario where this was being done, and in fact was not aware of any such rigs being available for use or owned by trucking companies in the area.

Findings and Conclusions:

As has been said on many occasions in Judgments rendered on other applications for line abandonments, the Railway Act lays down no principles upon which the Board should act in deciding whether to grant or refuse such applications. The Board in such cases weighs the loss and inconvenience to the public consequent upon abandonment against the burden that continued operation of the line will impose against the Railway.

In considering the points raised in opposition to this application, I must first state that I can give little weight to the evidence that the abandonment of the line would preclude the establishment of an industry at Alvinston. The information given was too vague for me to consider that such establishment hinged directly on the abandonment or retention of the line. It would appear to me that other factors enter into it.

I realize full well, from the evidence, that abandonment could have a considerable effect on the sugar beet industry in the Alvinston area. However, I must take into consideration the Company's commitment to relocate loading facilities to an alternative rail point, if the shippers request it and at no cost to them. Because of this, I must discount evidence as to the cost of trucking sugar beets all the way to Chatham, including the Company's suggestion for tractor trailer hauling.

Insofar as the transport of other farm produce such as soya beans, wheat and barley, while the evidence showed that higher costs might result with the loss of the rail shipping point at Alvinston, the evidence also indicated that the Inwood plant of the Inwood Co-Operative is a successful operation even though it has no rail facilities. If I should give weight to evidence that storage facilities at Alvinston are insufficient, and that abandonment of the line would require construction of more storage space, it would be tantamount to my agreeing that the line should remain in order to provide, through the use of box cars, additional storage space for the Inwood Co-Operative. This, I feel, I cannot do.

Farm equipment dealers in the area would suffer some additional expense, but here again, an unloading ramp at Watford or Glencoe would temper such loss to the dealers.

Against the above-mentioned loss and inconvenience to the shippers and receivers of traffic in the area, should abandonment take place, I must now weigh the cost that continued operation of the line would impose against the Railway.

As heretofore mentioned, after making the deductions that were felt necessary after a detailed study by the Board's staff had been made, I arrive at an annual operating loss of $9,103, which when added to the annual value of net salvage of $2,372 would amount to a financial improvement to the Company of $11,475 or about $1,100 per mile of line.

After weighing the above and after careful consideration of all evidence and submissions in this case, and bearing in mind the Company's commitment to relocate beet-loading facilities and to build a ramp for unloading farm machinery at Watford, I am of the conclusion that the loss and inconvenience to the public consequent upon abandonment is not sufficient to warrant continued operation of the line. I would grant the application of Canadian National Railways to abandon its Alvinston Subdivision between Glencoe (mile 0.28) and Alvinston (mile 10.74), a distance of 10.46 miles. Such abandonment may take place at any time after June 30, 1965, upon 30 days' prior notice filed with the Board and to be posted in the Railways' station at Alvinston.

The Canadian National Railways shall advise the Board that abandonment of operation has taken place within one week of such abandonment.

An Order will be issued accordingly.

John M. Woodard.

I concur:

H. H. Griffin.

Ottawa, April 15, 1965.

Railways: C.N.Rys.

Stations: Alvinston, Glencoe, Watford

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