Keeping the Dream Alive

Operating on the “better late than never” principle, I thought I’d discuss the Nova Scotia government’s decision to continue subsidizing the disused Cape Breton portion of the Cape Breton and Central Nova Scotia (CBNS) short-line railway.

In case you’ve just tuned in to this soap opera, the province has been paying Genesee & Wyoming, the American company that owns the CBNS, “up to” $60,000 a month since 2017 to keep it from abandoning the section of the rail line between the St Peters Junction (near Point Tupper) and Sydney. The province is doing this, it says, because the rail line will be essential to Montreal advertising-executive-turned-port-promoter Albert Barbusci’s plan to turn the Port of Sydney into a transshipment hub for ultra-large container vessels (ULCVs).

The province didn’t publish the monthly value of the subsidy but we got a peek at the receipts back in September 2019, thanks to an access to information request for G&W’s May 2018 to April 2019 invoices:

 

Month/YearAmount
May 201841,809.97
June 201836,336.56
July 201837,200.28
August 201849,123.21
September 201837,678.93
October 201847,589.44
November 201838,846.54
December 201836,763.05
January 201942,802.05
February 201938,417.59
March 201935,909.74
Total486,773.13

 

The average monthly payment over that 12-month period was $40,564. Under the agreement announced by Business Minister Geoff MacLellan on May 14, the “up to” $60,000 payment will be replaced by an “exactly” $30,000 payment, for which the rail line will not be expected to provide receipts. (What could possibly go wrong?)

 

Signs of life

As I noted at the time they were first published, each of the invoices (which you can view here) included at least one payment, and sometimes more, to the Halifax law firm McInnes Cooper for “land migration” services. Land migration is a process of converting any parcel of land about to be sold or subdivided into the land registration system.

Asked about those expenses by the CBC’s Tom Ayers, MacLellan said legal fees for land migration and sales did not sound like they should be covered under a subsidy intended to preserve the railway and promised to get “clarification” from G&W.

CBNS tracks near Point Edward. (Photo via Cape Breton Railway Victims Association)

CBNS tracks near Point Edward. The photo was taken after the Thanksgiving storm of 2016. (Photo via Cape Breton Railway Victims Association)

MacLellan also told Ayers he was beginning to ask “serious questions” about whether the subsidy, due to expire in March 2020, should be renewed:

This is specific to giving our island, giving the region time to develop any of the business opportunities that exist, and if they don’t exist, we can’t do this forever.

Speaking to the Cape Breton Post around the same time — September 2019 — MacLellan made it clear the decision to renew the subsidy would be “directly tied,” as the paper put it, “to the fortunes of a proposed container terminal in Sydney harbour” and said it would likely be made that December.

What actually happened in December 2019, though, was that Genesee & Wyoming was purchased by “affiliates” of Toronto-based buyout firm Brookfield Asset Management and GIC, Singapore’s sovereign wealth fund. Brookfield’s board chair is former New Brunswick Premier Frank McKenna. As I said of the deal in January 2020:

I can’t decide whether McKenna obviously knows all about the rail situation because he’s been talking to his old friend (and Sydney Harbour Investment Partners international adviser) Jean Chrétien or if he was entirely unaware that the $8.4 billion, 120-line, three-continent G&W deal included a 158-km stretch of disused rail in Cape Breton.

Asked in January 2020 about the sale of G&W, MacLellan said he’d “reached out” to Brookfield and hoped to meet with them to discuss “the entire story, the Cape Breton rail history.”

“We’ll still have the ability to extend that subsidy if need be but we have to get a sense from Brookfield what they think,” MacLellan told reporters in Halifax on Thursday.

The next reference I saw to the subsidy was on May 14, when MacLellan told Ayers that it had, indeed, been renewed in April, Nova Scotia having, as I noted above:

…worked out a new deal with the rail line, fixing the subsidy at $30,000 a month for one year…

The former subsidy required the company to submit invoices for the actual costs incurred to keep the line in place in case sufficient rail traffic ever returned.

Under the new deal, the maintenance requirements are the same, but there is less administrative burden because receipts are not required, MacLellan said.

MacLellan doesn’t mention whether he’d ever gotten clarity on the land migration charges or if he’d spoken to Brookfield and had a “sense” of what they think, so I asked the Department of Business whether the new owners of the rail line had been consulted about the amended Rail Line Preservation Agreement, as it’s known, and spokesperson Tracy Barron told me in an email:

This agreement was reached in discussions with the new owners. It is a fair and low-cost way to preserve the existing rail line while discussions continue about a possible container terminal in Sydney.

But the only person MacLellan mentioned consulting was Barbusci:

MacLellan said SHIP has lined up a significant amount of funding and that indicates a business plan that international financiers are willing to invest in.

“I believe there’s life in this project,” MacLellan said.

“I believe there’s life in this project.” That’s a rousing endorsement.

 

Vote of confidence

As you may recall, CBRM Mayor Cecil Clarke recently put CBRM council on red alert that a financing announcement was coming from Barbusci. Nothing has yet been made public, but perhaps Barbusci shared his latest “get” with MacLellan.

Remember, though, Barbusci and his partner in port promotion, Barry Sheehy, have been claiming to have “identified” the financing for this project since Day One. CBRM Mayor Cecil Clarke is on record as declaring securing the financing is the “simple” part. What Barbusci hasn’t identified — what would actually give “life” to this project — is a shipping line.

Barbusci himself, in a press release the Spectator did not have the privilege of receiving, said:

The investment highlights the important role NovaPorte could have on [sic] Nova Scotia’s economic future, provides support to our discussions with shippers and logistics providers, and gives confidence to our partners on financing NovaPorte.

“The investment highlights the important role NovaPorte could have on [sic] Nova Scotia’s economic future?” So, the government halving the amount it’s willing to spend to keep the rail line in place is a vote of confidence? And you couldn’t even be bothered to write a grammatical sentence explaining this? We really are in the final innings, aren’t we?

Compare that to what Barbusci was saying in November 2015, when SHIP was Harbor Port Development Partners (HPDP) and the CBNS railway was billed as one of its “partners”:

Cape Breton & Central Nova Scotia Railway Limited (CBNS) is in discussions with HPDP regarding the possibility of providing future rail service on the line from Truro to Sydney, Nova Scotia, as part of the deep water port development project in Sydney.

“We look forward to working with CBNS in building out our gateway and transshipment plans. This paves the way for HPDP and the Port of Sydney to move forward with additional feasibility studies and negotiations with other strategic partners,” said Albert Barbusci, Chief Executive Officer, Harbor-Port Development Partners.

Barbusci even had a quote from Louis Gravel, the Montreal-based president of Genesee & Wyoming Canada:

We look forward to explore [sic] the feasibility of this project from a potential transportation partner prospective. CBNS is an important employer in the province and if this project materializes it may constitute an important step to secure the future of the Cape Breton line.

Granted, “IF this project materializes it MAY constitute an important step to secure the future of the Cape Breton line” sounds like pretty faint praise in retrospect.

Gravel, according to his LinkedIn profile, left G&W in February 2020 to become president and CEO of SFP Pointe-Noire, a “public-private partnership that aims to develop assets” — including a 38-km railway, an iron ore pellet plant and port storage and loading equipment — at the Pointe-Noire terminal in Sept-Îles, Quebec.

G&W is no longer listed as one of SHIP’s “partners,” a term Barbusci has always used very loosely anyway, often to mean “company we paid for services.”

MacLellan has extended the subsidy for a year, so it will end at roughly the same time Barbusci’s “exclusive” agreement with the CBRM does. My guess? MacLellan is no more persuaded by Barbusci than I am, but doesn’t want to be accused of jeopardizing Nova Scotia’s “economic future” by kissing the rail line goodbye. So the province will pay $360,000 to keep the dream alive for one more year, Barbusci will make increasingly exotic announcements until his time is up, at which point he will request an extension to his agreement (probably arguing COVID-19) and council will…well, that’s the great unknown. Because it will be a new council by then, and possibly a new mayor, and maybe even a new era — one in which the CBRM is an older, more generally skeptical municipality.