Cape Breton & Central Nova Scotia Railway will cease running on Cape Breton Island, ending more than 135 years of rail service.
The railway, which did not reapply for a $3-million yearly government subsidy, has been granted permission by a Nova Scotia regulator to abandon the 100 miles of track between Port Hawkesbury and Sydney by October.
The move leaves some factories facing soaring shipping costs and scrambling to find new ways to bring in raw materials.
Beverage container maker Trans-Atlantic used to rely on the railway for 70 or 80 railcars a year carrying plastic pellets from Quebec and South Carolina. John MacLean, vice-president of the manufacturer that employs 40 people, said the railway raised the $600-per-car rate by $5,500 in the fall, and last week notified customers each car would cost $18,000.
"They obviously don't want to do business here," Mr. MacLean said by phone from Sydney. "They opted not to take the subsidy but they cited a decrease in traffic as the reason they had to increase the rate."
The loss of rail service means Trans-Atlantic has been saddled with the expense of trucking its raw material from Moncton, and has lost the flexibility and storage the rail cars offered.
"We have to be very vigilant on the way we operate. It has a huge effect on our competitiveness," he said.
Genesee & Wyoming Inc., which owns the railway, did not respond to a request for an interview.
In December, the Nova Scotia Utility and Review Board heard statements from other companies that said the end of the trains meant they faced hundreds of thousands of dollars in new shipping costs that would render their businesses uncompetitive.
Railway executives said at December hearings they did not renew the subsidy application because the future costs of maintaining and repairing the line outweighed the scrap and market value of the steel and other materials.
The railroad's bridges and culverts would need repairs that cost at least $30-million, while the company figures it can get $15-million to $20-million scrapping and selling the rails and other material.
"As a company we feel that's a much better use of our assets than simply operating on a subsidy that allows us to break even for 500 carloads a year. That's why we did not renew," said Josée Danis, assistant vice-president of Cape Breton & Central Nova Scotia Railway.
An executive with G&W testified rail traffic levels had fallen to 493 cars a year from 3,200 in 2002.
Cape Breton & Central Nova Scotia Railway will continue to operate the line on the Nova Scotia mainland that begins at Truro.
The railways in Cape Breton were built to serve the island's steel mills and coal mines, the last of which closed in 2001. Canadian National Railway Co. owned the line until 1993, but has no plans to return to Cape Breton.
"CN has no interest in the line because it is not economically viable," Mark Hallman, a CN spokesman, said.