Cape Breton companies are expressing concern the freight rail line that runs through the island could be abandoned after September.
Sean Burke, vice-president and general manager of Polysteel Atlantic Ltd., said he received a letter via email Monday from Genesee &Wyoming Canada, the parent company of the Cape Breton and Central Nova Scotia Railway, that the line would be shutting down operation later this year once the provincial subsidy runs out.
“It indicated that the service would not be continued after September,” Burke said Tuesday.
He said he expects to meet with railway officials later this week on the issue.
Abandoning the rail line would have detrimental effects, costing the businesses he operates at Sydport Industrial Park and at the Northside Business Park in the “several hundreds of thousands of dollars,” Burke said.
Polysteel Atlantic Inc., located in Sydport, relies on its raw material — plastic resin pellets — to be shipped in by rail in order to manufacture synthetic ropes at that plant and at East Coast Rope Ltd. site in North Sydney.
With less than four months before the $2-million-a-year subsidy expires in September, Burke said this has become a “crisis situation” because it leaves the company little time to prepare for the potential loss of the rail service.
“It’s difficult for us to operate under a long-term plan without knowing that that service is going to be there for the long term.”
He believes the only way to promote stability in Cape Breton is for the province to provide a subsidy to the railway over a longer period, which would aid economic development in the region.
The subsidy was first introduced in 2005 when then-owner RailAmerica applied to the Nova Scotia Utility and Review Board to abandon the line. The line was losing money for the company.
The province renewed the subsidy in 2011, based on the company providing receipts for infrastructure and maintenance work, and financial statements for operating losses, according to the Department of Economic and Rural Development.
The province has so far provided $20.6 million in subsidies to the railway to keep the line operating, said Toby Koffman, spokesman for the department.
“We have met with the company. No decisions have been made, but it is important to note that the company would need to go before the UARB if they had any plans to end rail service,” Koffman said in an email to the Post.
Short-line railway holding company Genesee & Wyoming Inc. bought the rail line from RailAmerica in 2012.
Cape Breton Beverages Inc. president Andre Coté said his company, also based at Sydport, relies heavily on rail to provide the raw materials needed for his business.
“We have to make sure the province does the right thing here and get the proper plan in place to renew that subsidy and keep that line operating,” he said.
Cape Breton Beverages is one part of an integrated company with Trans Atlantic Preforms Ltd., which ships in polyethylene terephthalate resin by rail in order to manufacture plastic beverage bottles at the plant. Cape Breton Beverages is the only distributor of soft drink products on the island.
Switching over to trucking, as the only alternative shipping method, would add “significant” costs to its bottom line, Coté said.
“That, no doubt, would put a serious, serious impact on our financial viability. It costs much more (to ship) by truck.”
Burke added that abandoning the rail line has the possibility of affecting jobs at his company.
“This is not a new topic. We know what the alternatives are. They’re much more expensive.”
The Cape Breton Regional Municipality, which continues to promote port development, needs rail as part of its equation to attract more commerce to the harbour.
Mayor Cecil Clarke’s spokeswoman released a statement Monday saying port development is “very connected to rail service.”
“Commercial development of the port will require rail infrastructure upgrades,” Christina Lamey said in an email.
She said Clarke met recently with Economic and Rural Development Minister Michel Samson, and Samson intends to meet again with the mayor when there is more information to share on the status of the rail line.
An official at Genesee & Wyoming Canada’s Montreal office was working on providing a response to the Post’s inquiry; however, no comment was received by deadline Tuesday.