Trainspotting Opportunities in Canada’s rail system

The first time I flew from Thunder Bay to Winnipeg, I was struck by the fact that the only connections between Eastern and Western Canada were a single highway — and two railways.

Perhaps to be Canadian involves an appreciation of railways and of the role that they played in opening up our vast country to settlement, development and the creation of wealth. Because we recognize they played such a key role in the past, we tend to view them as romantic vestiges of the 19th century. In reality, however, they are harbingers of the economy of the new millennium.

The 1990s have been exciting times for railways in Canada. The industry has faced deregulation, privatization, reorganization, divestitures and mergers, all against a backdrop of NAFTA, globalization, shifting trade patterns and new technologies.

For a century the Canadian railways operated in a highly regulated and protected market that did little to encourage market efficiencies. Deregulation and privatization during the 1980s and 1990s, however, brought big changes. It led to the closing of inefficient branch lines, the emergence of new short line operators, and a dramatic shift in the business culture at Canada’s two major railways.

Today’s railways are streamlining their operations, renewing their infrastructure, modernizing their equipment fleets and implementing new technologies. And whereas in the past railway engineering was practised mostly by in-house engineers and support staff, today both major railways are turning to consulting engineers for expertise. This change has created significant new opportunities both in North America and abroad, as developing countries in Central and South America, Africa and India are also looking for assistance to tap into the global demand for intermodal transport.

Freight traffic

With deregulation, both Canadian National (CN) and Canadian Pacific (CPR) generally vacated the unprofitable passenger rail services and left them to the crown corporation VIA Rail. Although recently there have been moves to start high speed passenger rail corridors in the Vancouver-Seattle and the Quebec City-Windsor corridors [see p. 42], the economic realities of these projects have little to do with the efficient movement of people. Similarly, notions of new 500 kph magnetically-levitated trains hold out a lot more promise for high-density passenger routes in Japan and western Europe than they do in Canada. While a Canadian high speed rail demonstration project might help Canadian rail technology suppliers better compete in the lucrative Japanese and European markets, or perhaps will provide a politically attractive national unity platform, such a project will succeed only with a massive investment of public money. The cost of the Quebec City-Windsor Lynx high-speed proposal made last May, for example, was estimated at $11 billion.

The Canadian railways have a long history of moving commodities such as grain, forest products, minerals and chemicals to market, but in the last 20 years they have lost a lot of this bulk business to the trucking and pipeline industries. The trend however, may be slowing, for the railways have been investing heavily to increase their competitiveness. Meanwhile, the national highway infrastructure continues to deteriorate, in large measure due to the tremendous increase in truck traffic and the raising of legal truck loads.

Both CN and CPR have been making headway in two particular sectors: intermodal (container) transport, and shipping for the automotive industry. They are making special efforts at responding to these clients’ “just-in-time” needs.

Over the past 25 years, freight movements across North America have increasingly shifted towards intermodal traffic involving truck, rail and ship segments. On long routes, containers and specialized automobile carriers have become the predominant means for shipping non-bulk cargo. On short haul routes the railways are planning to compete with the trucking industry by building “iron highways” to attract trailer shipments. An “iron highway” is essentially a roll-on/roll-off transfer facility for truck trailers.

In Europe, where inter-city distances are shorter, the move to containerized and intermodal solutions has been driven by the environmental benefits of reduced congestion on highways, greater energy efficiencies and rationalized infrastructure. Unfortunately, at a time when oil prices are low and environmental responsibility isn’t even on the radar screen for most Canadians, there has been little political motivation for innovative transportation policy initiatives. As the highway infrastructure continues to deteriorate, however, the benefits of the European model should become more apparent.

East-coast superport

Both CN and CPR railways are involved in the competition to develop a major superport on the east coast of North America. Private carriers Maersk Line and Sea-Land Service Inc. are searching for an east coast terminal for their post-Panamax container fleet. [Post-Panamax vessels are up to 1,000 feet wide, about 50 feet too wide to pass through the Panama Canal. Future ships will be even bigger, exceeding 1,100 feet in width.] CN is betting heavily on Halifax with its natural deep water and ice-free port. CPR is betting that either the port of New York and New Jersey or Baltimore will be home to the majority of Maersk-Sea-Land business. Although both the Baltimore and New York ports will require dredging to accommodate post-Panamax vessels with drafts of 14-15 metres, their proximity to the major eastern markets makes them attractive.

The Province of Nova Scotia and the Government of Canada are supporting the Halifax superport proposal. Up to $500 million may be required to tip the scales in its favour. In addition, improvements to the Halifax to New York rail corridor will be necessary. The smart money is betting on a dual port solution that will allow the private sector to play American and Canadian government subsidies off against each other. But regardless of which location is chosen, an east coast superport will increase the demand for railway container movements across North America. This need for a better land bridge could be good news for both major Canadian railways as they continue to shift to a North American perspective.

Heading south

Canadian railways are increasingly looking south to increase their business. It may surprise some readers, but Chicago is the key link needed to support continued growth of both major Canadian railways. Chicago is the most important connection node between the eastern and western U.S. railways, and almost 50 per cent of the country’s intermodal rail shipments originate, terminate or connect there. It is home to 23 major truck-rail intermodal terminals, accounting for over 10,000 container transfers per day. Any major land bridge between the Pacific and the Atlantic is almost certain to pass through this city.

In order to increase its presence in Chicago, CPR acquired 100 per cent of the Soo Line linking Chicago to Calgary and Vancouver through Minneapolis/St. Paul. The railway now operates four core routes: Vancouver-Calgary, Toronto-Calgary, Chicago-Calgary and Montreal-Chicago. In addition, the company has acquired the Delaware and Hudson Railway to strengthen its services between Montreal and New York City. CPR has been selling off non-productive assets and closing branch lines where short-line buyers cannot be found.

CN responded dramatically to the increasing demands for north-south goods movement by acquiring the Illinois Central Railroad in 1998. Illinois Central operates a core service between Chicago and New Orleans. This bold acquisition provides CN with the premier coast-to-coast-to-coast rail system in North America and a potential ferry bridge through New Orleans to emerging Mexican markets. The railway has an intermodal network extending from the Pacific to the Atlantic, and with the opening of the new 1,800-metre-long St. Clair Tunnel in 1995, it carries double-stack intermodal containers on the shortest route between Halifax and Chicago.

New nuts and bo
lts

One of the key ways railways have been achieving efficiencies is by investing in new AC-drive locomotives which have more power, better fuel efficiency, are more reliable and require less maintenance than their DC-drive predecessors.

With new technologies making longer and heavier trains possible, the railways are constrained on major routes by worn track, sidings which are too short and bridges that are too old. The response of the railways: upgrade track, invest in longer sidings and upgrade the old bridges. In other words: basic nuts and bolts projects. At the same time, they are investing in new high technology traffic management, scheduling and cost control systems because clients today need to know the progress of their just-in-time shipments from origin to destination. The railways are proving that they can compete with the trucking industry in just-in-time traffic, particularly on long haul and multi-modal intercontinental routes.

While the above improvements offer plenty of opportunities for consulting engineers, another interesting area is in the conversion of surplus rail corridors to new uses. One of the most immediate opportunities lies within the Greater Toronto Area where there are a number of unused rail corridors radiating from Union Station in downtown Toronto. New municipal taxation rules for railway lands is making their continued ownership by the railways unattractive, and they would be only too happy to sell off these urban corridors for their market values.

Several proposals, for example, are under development for using existing railway corridors to create a passenger rail link between Pearson International Airport and downtown Toronto. Although the municipal governments in the Greater Toronto Area have been slow to respond to the opportunity to convert rail corridors to transit or other public uses, this situation may change as the new GTA Services Board takes over responsibility for regional transit.

The railways have been capitalizing on their extensive corridors in other ways, notably by leasing rights to communications companies for the installation of fibre optic cables (see page 43). For the most part, the railway corridors provide the simplest, most direct and cost-effective route for locating the cables.

Lean, mean machines

The race to convert Canada’s railways into lean and efficient transportation machines is a difficult one. Although both major Canadian railways are publicly traded and have been operating profitably [CPR announced an operating income of $721 million for 1998, CN’s 1998 profit was $569 million], the rate at which some of the U.S. railways are improving their efficiencies suggests that Canadian companies need to increase their rates of capital investment. Funds are scarce.

The financial situation may have become a lot more complicated in January when the Supreme Court of Canada decided that the railways owe the same duty of care to the public as other institutions. The case involved a motorcyclist in Victoria who was thrown off and badly injured when his wheel got stuck in unused track at a railway crossing. Before that decision the railways had special protection against lawsuits of personal negligence. Now, with that protection removed, the railways may have to make safety modifications to 15,000, or 20,000 crossings, a project which could cost billions of dollars.1 The court decision could hasten line closures. On the other hand, it may be the catalyst that is needed to complete the rationalization of the rail networks.

So far, railways have demonstrated that they can compete as private businesses. What remains to be seen is whether our governments can respond with coherent transportation policies that fairly balance the advantages of various transportation modes in the massive geographic fabric that is Canada. The European Community has taken an integrated approach to transportation planning over the past five years and now has a Combined Transport policy that is intended to ensure rational transportation decision-making among the member countries.

Similarly the U.S. government enacted the Intermodal Surface Transportation Efficiency Act in 1991 which led to a comprehensive review of transportation policy. The country is moving forward aggressively to develop a National Intermodal Transportation System that is economically efficient, environmentally sound, energy efficient and provides the foundations for competition in the global economy.

In Canada we need similar government policies that will ensure the viability of our railroads if Canada is to remain among the economic success stories of the western world. Consulting engineers have much to contribute as the railways renew their infrastructure, build new facilities and strive for efficiency. CCE

Jeffrey Plant, M.B.A., P.Eng. is vice-president and general manager of Lea Associates’ Toronto office and a member of the American Railway Engineers and Corridor Maintenance Association.

1 The Globe and Mail, January 30, 1999.