FOIPOP Findings: CN Needs ‘Real Live Shipper’

By a strange confluence of events, I had already decided to cover the subject of rail this week before I read the Scotia Rail Development Society editorial in Saturday’s paper. The editorial simply served to spur me on (no pun intended).

Barry Sheehy and Albert Barbusci of Sydney Harbour Investment Partners (SHIP) have had a lot to say about the importance of rail to their quest to bring a terminal for ultra-large container vessels (ULCVs) to the Port of Sydney, although what they’ve said has really run the gamut:

HPDP and SHIP logos

  • “When rail is needed, it will be there,” Barry Sheehy, Port Day 2016
  • “Efforts to bring a container port and logistics park to the Sydney area are not entirely dependent on a Cape Breton railway, says the head of the firm with the exclusive marketing rights to Sydney harbour,” Barbusci to the Cape Breton Post in February 2018.
  • “[E]verything is done, we have all the necessary shipping lines and port operators…but rail needs to be rehabilitated,” Barbusci to the Cape Breton Post in September 2020.

As I’ve already pointed out, the idea that Barbusci has shipping lines (plural) prepared to offload containers in Sydney but cannot get the private-sector owner of the local short-line railway interested in the business beggars belief.

But there’s a lot of rail-related content that beggars belief in the port documents I recently received from the CBRM.

 

Sue them!

On 30 September 2014, under the subject line “Things we should talk about tomorrow with the Mayor,” Sheehy sent one of his trademark, long-winded screeds to Mike Moore, the consultant hired by Mayor Cecil Clarke (through Business Cape Breton) to work on the port file. Sheehy began by noting that the container port “feasibility study” was on hold. The “Drewry and Hackett quotes” were “reasonable” but:

…the PFRA quote is beyond the pale. The boys in NJ must think Cape Breton is funding the combined Gemini and Apollo Space Programs.

PFRA would be New Jersey-based Paul F. Richardson and Associates, the firm that had previously had the contract to promote the Port of Sydney. I’ve no doubt they are expensive and I’m even willing to believe they’re overpriced — but coming from a man who values his own services at $2,500 per day, this is a bit rich.

Rotten and split ties with "significant vegetation" on the Grand Narrows swing bridge. (Hatch)

Rotten and split ties with “significant vegetation” on the Grand Narrows swing bridge. (Hatch)

Sheehy updated Moore on the McKeil Marine project, touched on the Mayor’s upcoming China trip, then raised the happy possibility of the CBRM suing Genesee & Wyoming to keep it from abandoning the rail line:

Gene Kersey, who the Mayor knows, was an environmental engineer and senior manager at EPA for more than two decades. He knows the rules and tells me that American firms like Genesee & Wyoming are bound by tough EPA rules when operating abroad…The law is a little murky but that’s all good. It means we could possibly use EPA rules to launch a lawsuit or at least threaten one should the rail line be abandoned. The potential costs for G&W could be astronomical. We could set up a “Friends of Cape Breton Rail” committee, raise a little money and begin with a notification to G&W of their environmental exposure under EPA regulations. We could sue them in the U.S. rather than Canada. Now there’s a thought for G&W[‘s] legal department to ponder at bedtime. We would at least be hitting back instead of always taking it on the chin. A little mischief now and then can be therapuetic…at least for me.

Setting aside the question of whether American companies operating abroad are subject to EPA regulations (which I find very hard to believe), we’re still left with the question of whether launching a lawsuit against Genesee & Wyoming (a firm Sheehy and Barbusci will be claiming to be “work[ing] cooperatively with” a year later) is a good idea from a port promoter’s perspective. Sheehy is on record warning CBRM residents that bad-mouthing the port project at Tim Hortons could turn off potential investors — what kind of signal would suing an American company in a US court send?

I’m also struck by Sheehy’s notion of establishing an astroturf organization — “Friends of Cape Breton Rail” — to support the port project. Out of curiosity, I checked the Joint Stocks Registry to see when the Scotia Rail Development Society was founded and discovered it was registered on 24 March 2015. That is, six months later.

 

Seize the line!

On 27 February 2015, Sheehy sent an email to Barbusci and Moore. Under the subject line, “important rail considerations –vital for discussion with the Minister,” Sheehy referenced discussions with “JC” an “expert in rail/port combinations” (presumably, James C. Evans of the eponymous consulting firm who would later be paid $28,102 by the Port of Sydney for his services). JC’s concern was that the “present rickety rail line at slow speeds will not pass muster with shipping lines.” (An insight I could have shared with them for less than 28,000 smackers.)

No, Sydney’s container port, which would be unloading 20,000 TEU in 48 hours, required a “state of the art” line, wrote Sheehy:

As part of the overall mega-port project, investments must be made to upgrade the rail line to first class condition…This implies an infrastructure investment by the Federal Government and perhaps private investors. The prospect of this investment, along with equity in the port, may be sufficient to get CN on board.

CN train in Moncton, NB, 1971

CN train in Moncton, NB, 1971. (Photo by Roger Puta, scanned by Marty Bernard from U.S.A., Public domain, via Wikimedia Commons)

But the next day found Barbusci and Sheehy discussing CN in much harsher tones. They’d apparently received a summary of a Bechtel report (not included in the documents I received) and they were not happy about it — Barbusci referred to something having “de-rail[ed]” — and Sheehy drafted a response for Barbusci to share with the CBRM:

Ok we know what’s in the Bechtel report we will receive next week. Sydney has every possible advantage as a deep water port…Our only real problem is rail rates. CN charges the Maritimes two to two and a half times the rates charges [sic] in central Canada and comparable rates in the US. The Maritimes are being economically strangled by CN. The report will make clear the Milford [sic] harbor project was likewise single handedly killed by CN rates. Bechtel remains supportive and will stay engaged as consultants and we can use their brand in an announcement. They cannot however make a large investment until our rail rate problem is solved. They see this primarily as a “political problem” and when politics trumps economics they get gun shy and who can blame them?

In case you’re wondering how Bechtel came to be involved in this, in September 2014, Sheehy read an article about Bechtel being in talks with the U.S. government about funding “an offshore port on the East Coast.” The same article said that China was also planning to develop its own hub port off the coast of the US. Sheehy sent the article to Clarke and Moore (and others), announcing it as an opportunity for Sydney, as the cost of building out our port would be much lower than the cost of developing a floating port. He copied all the information about Bechtel’s Montreal office off their website and sent it to Barbusci (“Bechtel Canada just around the corner from you McGill Ave–Perfect”). Then two days later he wrote:

Since we have already reached out to Bechtel, we must quickly find out who the Chinese players are. The port they are both looking for already exists in Sydney. We could perhaps play both sides against the middle. Thoughts?

So in February 2015, when they received bad news from Bechtel, Sheehy immediately pivoted to China:

Albert is in conversation with important Chinese players, including port operators, shippers, railroad operators and investors and this could tip the balance back in our favor but they too will not want to be held hostage to CN[‘s] usurious rates. We are a [sic] cross roads. We know the line from Sydney to Truro can be made profitable with plans we have on the table (including new marshaling yards in [N]orth Sydney for Marine Atlantic) but the line will require investment, which we believe can be found.

CN train in Moncton, NB, 1971

CN train in Moncton, NB, 1971. (Photo by Roger Puta, scanned Marty Bernard from U.S.A., Public domain, via Wikimedia Commons)

Okay, I suspect that even people who found all of that plausible may have a problem with this next bit:

We must then acquire the line (eminent domain if necessary) as far as Moncton where new Marshaling yards will be built. This will give NB and NS some control of their own destiny. From there our traffic can be transferred into the US on route to Montreal the east coast and the mid-west. We believe investment money can be found to support such a strategy either here or at home or abroad.

Is it just me, or is there a kind of “Napoleon on Elba” vibe to these plans? “Acquire the line” as far as Moncton? Meaning, convince two provincial governments to expropriate rail line from CN (and G&W?) and then what? Operate it themselves? Give it to Barbusci and Sheehy and their Chinese partners? Who would take this talk seriously? I mean, other than Sheehy’s partner.

Barbusci forwarded Sheehy’s missive to Clarke, Moore and Bettens, saying:

…see Barry’s note below. Let’s plan to have a follow-up call with Cecil ASAP…it is obvious now that we need [Transport] Minister Rait [sic] to negotiate affordable rates with CN and also find a suitable syndicate to acquire the line before we can take our JV strategy any further.

I guess this passes for reasonable, compared to expropriating CN’s Truro to Moncton line and giving it to the Chinese, but it still sounds pretty nutty to me. And the fact that none of this actually transpired suggests it seemed nutty to Raitt too.

At this point, Barbusci had another inspiration regarding the rail issue, writing Clarke:

I plan to meet with China Merchants in a couple of weeks regarding port operations so why not introduce the rail opportunity at the same time. They have been investing in rail lines throughout China and definitely have the capital. It would be great if we could secure some capital to support our case with CN.

Let’s coordinate a 15 minute call with Barry and Mike ASAP so we may review the strategy prior to my departure.

This, I think, tells you a lot about the way Barbusci operates: let’s take 15 minutes and hammer out a strategy to convince a state-owned Chinese company to join forces with a private Canadian rail operator to refurbish a Nova Scotian rail line.

Honestly, you’d think Sheehy and Barbusci’s “JV strategy” would have died a death at this point, but no such luck. Apparently, if you can’t expropriate CN’s track or convince the federal Transport Minister to put the squeeze on them to lower their freight rates, you do the next best thing.

You try to get them to take a meeting.

 

“Real live shipper”

Credit where credit is due, Barbusci did get the port team a meeting with CN.

His “global Rolodex” apparently included Fiona Murray, CN’s vice president of public and government affairs (who was recently elected chair of the Railway Association of Canada). On 14 April 2015, Murray met with Clarke and his “working group” (Port CEO Marlene Usher, Moore, Barbusci and three Bechtel officials — Pete McMahon, Rex Gundle and Paul Huff).  Afterward, Murray wrote to Clarke to say it had been nice to meet him, adding:

We had a good meeting with your working group-they too have invested a lot of time and effort. I was comfortable to reach out to two key players here inside CN and have already received a positive response for a follow up meeting the week of April 27th -either Montreal or Toronto.

On April 17, Murray wrote to Barbusci:

Hello Albert,

Thank you for coming to CN and explaining the project. I have discussed it briefly with my colleagues in our Intermodal Overseas division and they would be available to meet the week of 27th.

I am just trying to connect with our network Strategies folks to see if we can get them and [sic] the same time.

Meeting would likely be in Montreal but could be Toronto, if that isn’t a problem for you?

After some back and forth about when (and in what city) to meet, Murray set the meeting for 10 AM Tuesday April 28 at CN Headquarters in Montreal. Barbusci wrote her on April 20:

We’re all set to meet with you and your colleagues on the 28th at 10:00am. The group is basically the same players at our end, we will have Marlene Usher and Mike Moore from CBRM as well as Pete McMahon, Rex Gundle and Paul Huff from Bechtel and myself.

Fiona Murray photo and CN bio

Source: CN website

Murray responds:

The CN participants will be myself and Peter Ladouceur, AVP Intermodal – international. I have already sent a briefing as well as your material to Peter, so we can get right into the meat of the Port of Sydney proposal and also how Port of Montreal fits in. Peter will be particularly interested in your tie into the shipping lines and Asia. I think it would also be worthwhile to discuss why this is an opportunity [now] (the list of game changers) as it is not an entirely new concept — our network strategies people tell me they put quite a bit of focus on Sydney in past years and the economics didn’t work, particularly with Halifax not operating at capacity. At this point our network strategies group have declined the invitation to participate.

I think this illustrates the difference between using your “global Rolodex” to open doors and actually accomplishing something once you’re in the room. Barbusci can get an appointment to pitch to Murray (who is, like him, based in Montreal and probably travels in his circles) but he can’t get to the people he really needs to pitch to, as he wrote Clarke (and Usher, CAO Michael Merritt, Moore and Sheehy):

Please read Fiona’s note and I suggest we need to talk before I respond. I don’t like the fact that her network folks have declined.

He also wrote to Murray:

Fiona,

Do you think we could tee up a quick call with your networks team? We would appreciate the opportunity to clear the air, I gather their [sic] referring to the Melford site.

But Murray replied:

Network folks have done work on both Melford and Sydney in the past and will need a compelling reason to revisit it.

I suggest we take it a step at a time –  first we need to get our commercial questions answered and validation from Intermodal team that this has positive outlook. If the commercial team are onboard it makes the network team discussion that much more compelling. I will be following up with them after our meeting and hope to bring them in at some point. I see this as an iterative process.

And then, telling Barbusci CN had a few “upfront questions,” she wrote the single best line in the entire exchange:

Has a real live shipper bought into this and to what extent will they commit new traffic – can you share this with us?

In short, the question literally everyone has been asking about this project since the beginning — does SHIP have a shipper? You can imagine Barbusci treating CN officials like he treats us — rhapsodizing about the port operator and the Chinese sister city and the tugboat operator he’s secured for Sydney — and the officials listening patiently before asking, again, “Yes, but do you have a shipping line?”

Murray’s other questions were pretty good too:

How do we address concerns around Halifax traffic – we are very sensitive about not eroding this traffic base.

Is there sufficient density to justify an IM [inter-modal] offering.

And CN wasn’t the only party with questions. On 23 April 2015, Barbusci sent Murray a list of questions Bechtel had prepared for the rail operator “in anticipation” of the April 28 meeting. Bechtel’s questions were also omitted from the documents I received (although perhaps I’ll get them by end-January) but you can get a sense of them from Fiona Murray’s responses, provided that same day:

Thank you Albert and Bechtel folks – just looking at these very quickly but I do not see that we will be in a position to answer them at the next meeting. Some of them are not in our wheelhouse -ie: anything to do with G&W should be addressed to them..CN will not be commenting on the shortline or the condition of track that we do not own.

As for the other questions — they are probably good ones but I believe we’ve got some basic but important first steps to accomplish before CN would start working on answering these.

Priority one is to determine CN’s interest on the commercial side.

Barbusci forwarded Murray’s response to Clarke, saying:

Cecil, we need to be certain that Minister Rait [sic] will handle the politics at CN.

CN’s concerns about Halifax could, I guess, be characterized as “politics,” but its refusal to answer questions about a rail line it doesn’t own and its concerns about its own commercial interests are surely just business. To his credit, Clarke seemed to think so, writing Barbusci:

Let’s focus on the last sentence she suggests. One step at a time right now. Minister Raitt agreed to a meeting in May or early June.

Although this could just be Clarke tacitly admitting what he never comes right out and tells Barbusci: that he doesn’t have the kind of pull with the transport minister that would allow him to call her up and tell her to “handle” CN for them.

 

SNC-Lavalin

But CN isn’t the only iron in the fire.

On 26 April 2015, for instance, Barbusci, under pressure from Bechtel, was pushing Clarke to get their exclusivity agreement signed:

We can’t sign an MOU with Bechtel until our agreement is signed with CBRM. We have a verbal agreement with Pete [McMahon] so he could deploy his team for Tuesday’s meeting with CN. I don’t know why its [sic] taking so long for Jim Gogan to send us a draft, we reviewed the terms in Montreal…

Pierre Anctil photo

Pierre Anctil (Source: Axium Infrastructure https://www.axiuminfra.com/team/?lang=en)

And before they’d even met with CN a second time, Barbusci was writing to potential investors, Pierre Anctil and Alexandre Galareneau-Micone of Fiera Axium:

Many thanks to both of you for taking the time to meet with me and my colleagues from Cape Breton. We have made huge progress over the past year and we plan to continue adding strategic partners to our team as we move along through 2015. As discussed, the key is CN, we have now scheduled our follow-up session with their senior management for April 28th in Montreal. Once we have secured CN as a partner I will revert back to you.

Emails show Barbusci had set up an “introductory” meeting for Clarke and company with Anctil, the head of the infrastructure fund, and Francois Veillet in August 2014 and that Alexandre Galareneau-Micone attended Port Day in Sydney in 2015.

And now I have to ask your indulgence, because I think it’s worth talking about Anctil for a moment. An engineer with strong ties to the Quebec Liberal Party, Anctil was also a former vice-president at SNC-Lavalin who was implicated in an alleged pay-to-play scheme involving the provincial Liberals and the province’s biggest construction companies. As the Montreal Gazette reported in November 2014:

…two former SNC vice-presidents, Normand Morin and his successor Pierre Anctil, each told police that their job included the unofficial responsibility of monitoring and arranging for political financing. The men said that former SNC-Lavalin CEO Jacques Lamarre informed them of this responsibility, and that they were in contact with businessman and Liberal fundraiser Marc Bibeau to arrange for donations to the Liberals. SNC-Lavalin’s employees acted as straw man donors, Morin and Anctil confirmed, and the company reimbursed them. There were also allegedly cash payments.

LaPresse reported that during Anctil’s term as vice president, 2005-2008, SNC-Lavalin had donated $150,000 per year to the provincial Liberals.

Eventually it would be revealed that SNC-Lavalin’s scheme included donations to federal political parties as well — chiefly the Liberals. As the CBC reported in April 2019, Elections Canada investigators determined that between 2004 and 2009, 18 SNC-Lavalin employees, directors and some spouses contributed nearly $110,000 to the Federal Liberals, including Anctil, who “was paid $4,462.88 by SNC-Lavalin as compensation for his donation to the Liberal Party of Canada on June 30, 2004.”

Anctil emerged unscathed from all this (only one SNC-Lavalin official — Normand Morin — was charged and, ultimately, fined $2,000, for his involvement in the scheme). Today, Anctil chairs the board of the Montreal Heart Institute and remains the head of Axium Infrastructure (although it is no longer associated with Fiera, which cut ties with Axium in December 2015).

I’ve got one more nugget of information that I’m going to drop here, partly because it kind of fits but mostly because I find it funny. Anctil, the potential investor, was a very big Liberal (he’d been Quebec Premier Daniel Johnson’s chief of staff) and when Clarke and co were in Montreal in 2014 to meet him, they also met with Dentons, the law firm that employs an even bigger Liberal, former Prime Minister Jean Chrétien who would eventually be paid to act as SHIP’s international advisor.

Albert Barbusci (fourth from left) and Jean Chrétien (fifth from left) visit China Communications Construction Company. (Source: Novaporte website)

Albert Barbusci (fourth from left) and Jean Chrétien (fifth from left) visit China Communications Construction Company. (Source: Novaporte website)

The funny part is Sheehy’s attitude toward Liberals. Here he is writing to Moore and Clarke on 17 August 2014 (under the subject line “One more crazy idea”):

…I cut my political teeth in Alberta during the [National Energy Program] and thoroughly distrust all Liberals, don’t even ask me about the hapless NDP.

He then goes on to fantasize about being appointed to the Senate:

By the way, I asked Albert what he thought about me becoming a Senator. He laughed and said “on your first day in the Upper House you would break all protocol, kick in the door to the House of Commons and proceed to beat the leader of the Opposition with the Black Rod.” I rather liked the imagery. He predicted a short but exciting political career lasting ten or 15 minutes before I was arrested and dragged away. My friend of 50 years is usually right about these things.

Again, I’m no expert, but is political partisanship really an asset in a port promoter?

 

Coda

By the time they were signing their exclusivity contract with the CBRM in June 2015, Barbusci and Sheehy had apparently already struck out with CN and Bechtel.

But instead of folding their tents and stealing away, they pivoted to China.

Then in January 2019, Barbusci announced the Chinese had backed out of the project, at which point they pivoted to an American investment firm, then to a Michigan company with an untested process for turning plastic into fuel, then to Membertou.

THEN, in September 2020, in the depths of a world-wide pandemic, all the pieces fell magically into place, as Barbusci told the Cape Breton Post:

Everything else is in our hands, we have all the necessary shipping lines and port operators, we’ve been in discussions for years – but the rail needs to be rehabilitated and running again before we put a shovel in the ground.

Which brings me back to my initial point: if he has the necessary shipping lines in place, why is he talking to us? Why is he not back in Montreal making his case to CN or in Toronto talking to the new owners of the CBNS?

I have my theories, but I’ll let you draw your own conclusions.