“December will likely be the decision month about the future of a subsidy preserving Cape Breton’s rail line,” Cape Breton Post, 19 September 2019
Do you get the feeling we’re being allowed to listen in on a private conversation between Nova Scotia Business Minister (and Glace Bay MLA) Geoff MacLellan, the person imposing that December deadline, and our port marketer/promoter Albert Barbusci, the person upon whom the deadline is being imposed?
MacLellan made it clear the decision to renew the subsidy will be “directly tied,” as the Post put it, “to the fortunes of a proposed container terminal in Sydney harbour.”
He’d actually said the exact same thing this spring, telling the Post — in an interview published on May 14 — that “significant” progress on port development would be needed to maintain the rail subsidy.
Back in May, Barbusci was certainly listening, because the very next day — May 15 — he issued a press release claiming to have partnered with a New York private equity firm, AVAIO, whose “financial and development investment expertise” would enable Barbusci’s company, Sydney Harbour Investment Partners (SHIP), to “advance the preconstruction activities required to put the port into construction.” (The AVAIO website, as was the case last week when I checked it, lists only one “active investment” and it’s not the Port of Sydney container terminal, it’s a Mexican natural gas liquifaction project.)
Of course, the most striking thing about Barbusci’s May announcement was what he didn’t say — but had to admit, when he spoke with the CBC’s Tom Ayers on May 16 — namely, that SHIP had to find new financial backing because the Chinese interests Barbusci had claimed were on board to design and build and finance the terminal (chiefly the China Communications Construction Company) had backed out. Barbusci claimed CCCC, which is owned by the Chinese government, had soured on the Sydney deal because of two diplomatic disputes with Canada (the federal government’s decision to block CCCC’s purchase of a Canadian construction company and the arrest of Huawei CEO Meng Wanzhou in Vancouver in December 2018).
Make of that what you will.
The other striking thing about Barbusci’s May 15 announcement was that it clearly didn’t qualify as a “significant” port development in MacLellan’s books, because four months later, the business minister is sending the same message and it will be interesting to see what Barbusci pulls out of his hat this time.
December Hustle
The timing of the deadline — December — makes a lot of sense to me because of a CBRM phenomenon I have previously identified as the “December Hustle.” You can read my detailed explanation in that 2017 article, but for now, I will give you the Coles Notes version of my theory.
The December Hustle refers to CBRM Mayor Cecil’s Clarke’s habit of pretending, almost every year just before Christmas, that really important events requiring immediate, high-pressure decisions are unfolding in our municipality.
In December 2014, it was the sale of Archibald’s Wharf, which was necessary because it would bring ship repair services into the harbor, bolstering the case for the Sydney container terminal.
In December 2015, the mayor went to China without telling anyone — not even the deputy mayor — that he was going. His expense reports for the trip provide a one-word description of its purpose (“China”) and a $4,991.50 airfare which was picked up by the Port of Sydney Development Corporation which was helping foot his travel expenses at the time. Why was he in China? In support of the container terminal project, of course.
In December 2016, the hustle was extending Harbour Port Development Partners’ (HPDP) two-year exclusive agreement as the CBRM’s port developers by an additional five years. (Meaning, they will still be our port developers after Clarke’s second — and possibly last — term ends in 2020.) It had to be done immediately if not sooner because MOMENTUM.
In 2017, the hustle started in November, when Clarke called a special meeting and pressured council into signing an Option and Development agreement with HPDP (which, by then, had become SHIP). Clarke then went to China, along with his executive assistant Mark Bettens, CBRM CAO Marie Walsh and then-Economic Development Manager John Phalen, without telling anyone. The first the public heard about it was a Post story written to mark his return.
In December 2018, the Mayor, who had stepped away from his desk for most of the year to run for the leadership of the provincial Tories, held a meeting to decide what would be discussed at future meetings. I think this was intended to show how on top of issues like securing funding for a new central library he was (I know) but as December Hustles go, last year’s was decidedly lackluster.
So the question is, will Clarke and Barbusci take advantage of this lowered bar to try a low-key announcement (“We’re offering free certificates to Albert’s tree-climbing facilities to anyone who will repair the railway”) or will he spring something truly fabulous on us — like a shipper that has almost, sort-of, maybe agreed to upend the way it services the East Coast of North America by making Sydney its first port of call?
I, for one, expect to be making a lot of popcorn this December.
And now, a word from your planet…
I think we will look back on this merry dance Albert Barbusci has led us with regret, but not necessarily for the reason that first comes to mind — that he’s played us for fools.
I think we’ll regret that we allowed the fate of our rail line to hinge on his port dream. Because just as countries that are serious about tackling climate change are beginning to look seriously at rail — countries like Germany, which is about to put its first zero-emissions, hydrogen-powered train into service — we’re probably poised to sell our rail line for scrap.
This is the kind of thing the school kids, who will be marching again this Friday, want us to be thinking about.
Germany’s zero-emissions, hydrogen powered train. (Source: CNN)
Addenda
The Post‘s story about the latest warning from MacLellan got me to wondering how much money the province has put into the short line CBNS railway (the whole thing, not just the Sydney Subdivision) since CN sold it in 1993.
So I went through all the Public Accounts (Supplemental) records I could find online (1996-2019) and made a note of all the funding given to the CBNS, under its various owners.
Doing that made me realize there was a lot of context I couldn’t fit into a table, so I also did up a timeline.
I hope you find them helpful.
Note: The Department of Business is actually just the latest incarnation of the Department of Economic and Rural Development and Tourism. I could have put them in the same column but I didn’t.
| Year | TIR | Business | Economic and Rural Development and Tourism |
|---|---|---|---|
| Genesee & Wyoming | |||
| 2019 | 414,856.43 | 862,583.32 | |
| 2018 | 393,660.35 | 47,326.25 | |
| 2017 | 456,635.79 | ||
| 2016 | 449,418.92 | 383,308.55 | |
| 2015 | 442,184.92 | 765,461.04 | |
| 2014 | 475,653.00 | 1,580,691.45 | |
| 2013 | 420,893.10 | 5,769,995.78 | |
| 2012 | 280,719.22 | 1,568,680.95 | |
| RailAmerica | |||
| 2011 | 268,831.37 | 2,135,415.01 | |
| 2010 | 325,491.50 | 2,799,950.53 | |
| 2009 | 228,532.46 | 2,023,249.75 | |
| 2008 | 275,228.91 | 2,066,384.87 | |
| 2007 | 249,221.76 | 1,471,882.51 | |
| 2006 | 286,429.45 | 746,179.39 | |
| 2005 | 204,036.79 | 697,706.22 | |
| 2004 | 262,498.61 | 1,406,505.94 | |
| 2003 | 257,376.87 | ||
| 2002 | 256,283.06 | ||
| 2001 | 217,741.65 | 710,445.35 | |
| 2000 | 216,419.06 | ||
| RailTex | |||
| 1999 | 284,411.76 | ||
| 1998 | 6,373.00 | ||
| 1997 | 237,591.16 | ||
| 12,157.80 | |||
| 1996 | 389,398.66 | ||
| TOTAL | 7,312,045.60 | 1,293,218.12 | 23,742,548.79 |
| TOTAL (ALL) | 32,347,812.51 |
CBNS TIMELINE
1992
CN is prepared for privatization through cuts to management, wide-scale layoffs and the abandonment and sale of branch lines.
1993
October RailTex buys the 394 km short line railway from Truro to Sydney from CN for $20 million and rechristens it the Cape Breton and Central Nova Scotia Railway (CBNS).
1995
November CN is privatized by means of an initial public offering (IPO).
1997
CN stops routing Newfoundland-bound container traffic through North Sydney, unloading it instead in Halifax for transport by the shipping company OceanEX.
2000
Via Rail begins an experiment with the Bras d’Or, a passenger train that leaves Halifax on Tuesdays and Sydney on Wednesdays during the tourist season.
February RailAmerica buys RailTex and all its assets, including CBNS.
2001
The closures of Sydney Steel and Devco coal mines result in the loss of thousands of carloads of freight per year on the CBNS.
2002
December: NS Economic Development Minister Cecil Clarke issues a press release saying he is pleased with progress to date on the province’s plan to preserve the Sydney Subdivison, a 158-kilometer section of the CBNS rail line running from the St Peters Junction (near Point Tupper) to Sydney:
The province has the option of offering to assign its right to purchase the assets at net salvage value to other prospective buyers, which the minister indicated during his meeting with rail customers in North Sydney on Nov. 12. Since that time, the government has engaged the Canadian Transportation Agency to determine the net salvage value. A response is expected in January.
By offering to assign its right to another potential buyer, the province is helping to make the asset available at the most competitive price.
2003
A study prepared for Enterprise Cape Breton Corporation (ECBC) by KPMG concludes that in 2002, there were 520 outbound carloads of cargo per year originating east of St. Peter’s and 767 inbound carloads.
March NS Economic Development Minister Cecil Clarke issues a press release “welcoming” a decision by the CBNS to keep the Sydney Subdivision open:
“The decision is in and it’s good news for Cape Breton. We have a railway,” said Mr. Clarke. “We said there needed to be sufficient traffic to sustain the line and we, together with our partners in business and the federal government, worked very hard to identify that traffic. CBNS’ decision to accept the proposal coordinated by the province is a testament to the proposal’s viability.”
The proposal, which includes commitments of increased cargo traffic and/or other support from a number of interests, including Nova Scotia Power, Canadian National, Via Rail, AMCI, and the federal and provincial governments, achieves the 5,000 rail car breakeven number that the railway said it needed to keep the line open.
2004
RailAmerica applies to the Nova Scotia Utility and Review Board (NSUARB) to abandon the Sydney Subdivision in 2005.
Via Rail ends its experiment with the Bras d’Or.
2005
September The government of Nova Scotia agrees to provide a $10 million subsidy to CBNS to keep the Sydney Subdivision open for the next five years. A government press release says:
The agreement provides up to $2 million per year over five years to cover operating losses and capital-maintenance expenditures incurred by the St. Peter’s Junction-to-Sydney section of the company’s rail line.The agreement provides up to $2 million per year over five years to cover operating losses and capital-maintenance expenditures incurred by the St. Peter’s Junction-to-Sydney section of the company’s rail line.
Peter Touesnard, assistant general manager of the railway, which withdrew its application to abandon the subdivision, says:
We are very optimistic about new customers and will be exploring these opportunities energetically through a concentrated marketing effort.
2008
Fortress Investment Group, the owner of RailAmerica, pressures the company to improve returns, causing CBNS to hike rates dramatically for individuals and companies accessing railway property for driveways, utility lines, etc.
2010
September The government of Nova Scotia approves a one-year extension of the 2005 maintenance deal, retroactive to April 2010.
2011
September The government of Nova Scotia agrees to continue the subsidy for three more years, allowing RailAmerica access to over $2 million over the course of the deal. Says RailAmerica president and CEO John Giles:
We value our customers and the long-standing partnership we’ve had with the province. RailAmerica shares the province’s interest in growing freight-rail opportunities.
2012
January The government of Nova Scotia, through the Department of Economic and Rural Development and Tourism, announces it will provide $3.3 million to RailAmerica for capital repairs to the CBNS. A press release says the money will be used “to complete significant repairs and maintenance to the rail infrastructure to prevent deterioration, including bridge improvements and repairs to the Sydney facilities.”
December US-based Genesee & Wyoming buys RailAmerica and all its assets, including CBNS.
CBNS Railway. (Source: G&W website)
2014
June Genesee & Wyoming announces it will not seek a renewal of the provincial maintenance subsidy, in place since 2005, and that it intends to seek permission from NSUARB to abandon the Sydney Subdivision. Traffic on the line has declined to 493 carloads, inbound and out.
October Genesee & Wyoming declares its intent to discontinue service and abandon the track on the Sydney Subdivision. In response, the province establishes the Minister’s Rail Committee (MRAC) and commissions three reports:
- An assessment of the use of rail versus trucking to ship goods
- An engineering study on the condition of the rail line
- An assessment of potential economic opportunities that could serve to increase rail traffic over the Sydney Subdivision.
November CBNS institutes a significant rate increase and the six companies that had been using the railway into Sydney stopped using the service.
December The last westbound train leaves Sydney.
2015
June The NSUARB rules that G&W must offer service (which can be trucks) between St Peters Junction and Sydney until October 2015. The earliest the railway may apply to abandon the line is April 2016.
September The studies commissioned by MRAC (total cost: $152,600) are completed and summarized by Group ATN in its Summary Report: Overview of Studies Undertaken with Respect to Rail Services on the Sydney Subdivision. which states (among other things):
In its present state, the condition of the line, and more particularly, the speeds with which trains can travel and the turnaround time on the line between Truro and Sydney is a major deterrent to attracting more business to rail. Addressing these deficiencies would require significant capital investment and ongoing
maintenance of the line.The engineering study identifies (from secondary sources) what needs to be done, and estimates an investment requirement of more than $31.4 million over five years.
And:
Of the potential economic development projects reviewed, only the proposed container terminal could result in a significant increase in rail traffic over the Sydney Subdivision. The status of the Sydney Container Terminal is unknown at this stage, and hence, could not be definitively used to predict volumes in the rail utilization analysis conducted during the study.
November Harbor Port Development Partners (now Sydney Harbour Development Partners) issues a press release announcing it will be “working together” with G&W on the Port of Sydney container terminal project.
2016
March Days before G&W can apply to abandon the Cape Breton portion of its line, Nova Scotia announces new regulations for companies planning to abandon rail lines, under which, according to the CBC, G&W can apply to abandon the line but must then:
…offer the line for sale to private sector interests. If a potential buyer is found within 30 days, a period of six months would be allowed for negotiations to take place.
If there are no offers, the province could then make an offer of its own. However, if government is not interested, Genesee & Wyoming could begin the abandonment process as laid down in the new regulations.
Then-Transportation Minister Geoff MacLellan said the company would also be responsible for gathering financial information:
We have to have a full picture of the net salvage value which will be the costs of all removal, remediation, environmental cleanup, all those impacts that removing the rail would have.
Obviously that’s weighed against the overall value of the assets, which is predominantly the steel.
MacLellan says the rules are to ensure “taxpayers” aren’t responsible for any necessary environmental cleanup.
November The Spectator looks into the exorbitant “utility fees” that G&W continues to charge landowners hoping to run power lines or driveways over the tracks of the Sydney Subdivision.
2017
At some point during the year, the Port of Sydney Development Corporation pays G&W $120,000 for “participation in rail strategy for Port.”
May The NS Department of Transportation and Infrastructure Renewal (TIR) hires consultant Neil MacNeil to look into the high “utility fees” charged by Genesee & Wyoming.
September On the Friday before the Labor Day Weekend, Business Minister Geoff MacLellan issues a press release announcing the province has cut a deal to keep G&W from applying to abandon the Sydney Subdivision:
This agreement preserves the existing rail line, which is a key component of the proposed container terminal in Sydney. Government continues to work together with businesses, community and municipal leaders on economic development related to Cape Breton. Strong transportation links are a key component of building a stronger economy.
The agreement, which is backdated to April 2017, will see the province pay the rail operator up to $60,000 a month for “valid expenses” for the next year. It will be extended in 2018 and again in 2019.
September Neil MacNeil releases his Assessment of Railway Crossing Fees. The Spectator discovers, by means of a FOIPOP, that both Nova Scotia Power Inc and G&W have been permitted to read the report and suggest changes before its release. To date, no solution has been found to the problem of high utility fees.
2018
Hatch Engineering submits a report — for which the Port of Sydney Development Corporation paid it $80,300 — that puts the cost of repairs and upgrades to the Sydney Subdivision at $101 million.
2019
May Business Minister Geoff MacLellan tells the Cape Breton Post “significant” progress on port development will be needed this year to maintain the Cape Breton rail subsidy.
September Business Minister Geoff MacLellan, in an interview with the Post, says we should know by December whether the agreement will be renewed again in 2020, telling the paper the decision will be directly tied to the fortunes of a proposed container terminal in Sydney harbor.
And that’s where I came in…
