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Sudbury competitor looks to take over Sault-to-Sudbury rail line as current operator threatens pullout

Genesee & Wyoming currently services Algoma Steel, Domtar and EACOM but says it doesn't generate enough revenue to complete proper track work

SUDBURY — A Sudbury rail services company wants to "put the brakes" on more government spending to an out-of-province railroader that's threatening to drop northeastern Ontario freight service by year's end.

Diesel Electric Services and its parent company, Milman Industries, have made it no secret they're out to scoop the business from Genesee & Wyoming Canada and take over the haul on the Sault Ste. Marie-to-Sudbury short line, known as the Huron Central Railway.

The Montreal-based subsidiary of Genesee & Wyoming hasn't provided an official closure date but intends to discontinue service sometime in December. They're asking the federal and provincial governments to put together a $40-million subsidy for maintenance and safety upgrades to the track.

Closure notices and track funds have been a familiar story to industrial players along the Highway 17 corridor since 2009.

Canadian Pacific Rail (CP) owns the line but leases it to Genesee & Wyoming to feed steel and forest products to CP's main line in Sudbury. CP doesn't contribute any money for track work.

Despite serving Algoma Steel in Sault Ste. Marie, Domtar in Espanola and EACOM in Nairn Centre, Genesee insists the line doesn't generate enough revenue for them to do the necessary track work without government assistance.

"If these guys are going to keep sucking money out of the government and the taxpayers, everybody needs to know there's other options," said Jason Carriere, vice-president of Diesel Electric Services.

To pitch their case, officials with Diesel Electric took provincial Finance Minister Rod Phillips on a Sept. 18 tour of their transload facility in Sudbury's west end – which handles freight coming off the Huron Central – and their locomotive shop on the city's east side, where they repair CN locomotives on a 24-hour basis.

The week before, Milad Mansour, president of Milman Industries, said he was told by Energy, Northern Development and Mines Minister Greg Rickford that the funding well has run dry for Genesee & Wyoming Canada.

"They're not going to give them any money," Mansour claims he was told by Rickford. "None."

Mansour said Rickford delivered this response during a stopover in Sudbury earlier this month as he and Premier Doug Ford were on their way to a sod-turning ceremony at the IAMGOLD open-pit project in Gogama.

"From the horse's mouth."

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Communications staff in Rickford's office couldn't confirm his remarks and the minister was not made available for an interview. Their only statement was that the railway's application through the Northern Ontario Heritage Fund Corporation is under review.

"We were told by the minister there was no funding," added Carriere. "And that's what really needs to happen."

Carriere suggests this conversation and tour of the company might be a negotiating tactic by the province to force Genesee ownership to invest more in track maintenance, or to force its hand on a closure date, allowing Queen's Park and CP to plan for another carrier to take over operations.

Late last year, the province provided interim funding of $980,000 to keep freight moving and keep Genesee & Wyoming in place for another year to buy time to reach a long-term solution.

According to Mansour and Carriere, they were approached last year by provincial cabinet ministers, including Rickford, about their interest in partnering with the Ontario Northland Transportation Commission to take over service. The possibility of returning passenger rail (dropped by CP Rail in the 1970s) has entered the discussion.

Both admitted they do not know the province's intentions. They're letting the situation play out.

And with no closure date provided, CP is telling them nothing. If Genesee & Wyoming departs, CP would have to either step in to service its customers or lease out the line out again.

Genesee and Wyoming's lease with CP runs through 2040. CP declined comment when asked by Northern Ontario Business if Genesee would be violating the lease by departing or if an exit clause exists.

If asked to take over, Mansour and Carriere are confident they are up to the task, with 18 locomotives – some on lease, some on standby – and available engineers and conductors in Sudbury.

Both said they have knowledge of the track, and that senior executives at CP are well-acquainted with their capabilities.

During the last round of track maintenance on the Huron Central, Carriere said they operated the ballast train between 2010 and 2012, hauling aggregate out of a quarry at the Serpent River First Nation.

"For us to serve an EACOM or a Domtar from a train from Sudbury to Espanola is no problem whatsoever. We were running to west of Blind River," said Carriere.

The Huron Central Railway employs more than 40 with the short line's administrative office in Sault Ste. Marie. Eliminating those jobs or transferring those positions to a Sudbury company could become a regional political issue in itself.

And critics of Genesee & Wyoming have questioned on social media why North America's largest short line carrier needs a government subsidy. The highly profitable Connecticut-based railroader was acquired last year for US$8.4 billion by Brookfield Infrastructure Partners and GIC, a Singaporean wealth fund.

Rather than be backstopped by subsidies, Mansour also believes there's more business to be tapped from that line, possibly if customers were offered a more competitive freight rate.

Down the road, traffic on the Huron Central could be bolstered significantly by nickel from the Ring of Fire. Noront Resources expects to be in production with its Eagle's Nest Mine by mid-2025. That ore would be processed in Sudbury.

In an email to Northern Ontario Business, Genesee & Wyoming didn't provide a final date, but their plan remains to stop service in December, "assuming no government investments are confirmed by then," said André Houde, G & WC's vice-president of human resource and administration.

All shippers that use their service have been contacted and informed of their plans, he said.

"At this time, (Huron Central) continues to have discussions with government officials in order to find a solution that could see the rail line pursue its operations beyond December 2020," he said.

Houde said the company won't be commenting on the progress of their talks with the government while they're underway.

—Northern Ontario Business

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