Wednesday, May 04, 2016

National Dream redux

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VIA Rail President and CEO Yves Desjardins-Siciliano VIA Rail President and CEO Yves Desjardins-Siciliano Stephen C. Host (all photos)

From the April 2016 issue of Railway Age: From the era of fur-trading voyageurs, the St. Lawrence River Valley between the Great Lakes and Montreal has been Canada’s economic aorta. Solitary canoes gave way to steamships, railways, airplanes and freeways, and the vital artery is now clogged within a smear of yellow smog, often thick enough to taste.

Most of the congestion and much of the pollution is due to reliance on individual passenger vehicles for travel between the country’s two largest cities, Montreal and Toronto. In Europe or on the eastern seaboard of the U.S., such a 600-km (372-mile) separation would be deemed an optimum distance for intercity passenger trains. Problem is, the busy main lines of CN (Canadian National) can accommodate just six daily passenger departures each way, slotted between intermodal hotshots and slow-ordered oil trains.

Now, all indications are that Canada will have a fast, frequent and fully electrified, intercity passenger railway by 2020—more than a century after what is still the country’s only electrified passenger line opened in 1918.

Since its creation in 1977 by Prime Minister Pierre Trudeau from a cast-off collection of tired, first-generation diesels and 1950s coaches (but no tracks of its own on which to run them), VIA Rail Canada (commonly referred to as VIA or VIA Rail) has struggled to maintain a credible timetable. At the operational mercy of freight-only carriers that didn’t give an air horn’s hoot about passenger schedules, successive VIA Rail CEOs have lamented the difficulty of running trains without a railway.

The past decade was particularly painful. Freight trains outgrew the length of passing sidings, forcing VIA Rail’s shorter passenger trains to cede the main track at every meet. A succession of federal governments, in a parsimonious quest for balanced budgets, kept VIA running, but with little hope for growth.

Then, two years ago, in the twilight of its 10-year rule, the Conservative government made what seemed like a routine elevation of VIA Rail’s general counsel to the presidency: Yves Desjardins-Siciliano, a Montreal-born lawyer and dutiful bureaucrat.

Wrong. After a few months on the job, Desjardins-Siciliano sloughed off his sheepskin disguise and began to howl against the tyranny of freight train dispatchers and austerity’s starvation diet. The new CEO hit the luncheon circuit to promote the notion of a dedicated passenger railway—starting with Montreal, Ottawa and Toronto—that would be funded through public-private partnerships or what he prefers to call “public-public partnerships,” referring to Canadian public sector pension funds that invest the world over in passenger railways.

Desjardins-Siciliano sketched the outline of a dedicated right-of-way that would be cobbled together by some future, more sympathetic national government—with trackage and trainsets financed by investors seeking a safe haven in a country whose foundational motto is “Peace, order and good government.” Boring, perhaps, but “nice boring,” if you are a global investor looking for a safe haven. The government responded with resounding silence. Desjardins-Siciliano’s after-lunch speech tasted like pie-in-the-sky.

Then, in October 2015, came the Trudeau Restoration. Justin, son and heir to VIA Rail’s creator Pierre, was elected by voters to the country’s Prime Ministership—a job that, relatively speaking, is considerably more powerful than the presidency of the United States. With a parliamentary majority and strict voting discipline, the Prime Minister controls the legislative majority as well as the executive branch. Gridlock, in Canada, is confined to the highway between Montreal and Toronto.

Trudeau II offered up his own Christmas pie in the form of the ritualistic but authoritative “Speech from the Throne,” setting out the new Prime Minister’s legislative program. The juicy plum Justin pulled out by his thumb was a promise to invest heavily and immediately in public works and transformational projects, notably passenger transit and climate-friendly infrastructure: “Recognizing that public investment is needed to create and support economic growth, job creation and economic prosperity, the Government will make significant new investments in public transit, green infrastructure and social infrastructure.”

So, suddenly, Desjardins-Siciliano was staring out from the abyss, waving his transformative plan that would stimulate the economy and go a very long way towards meeting Trudeau’s commitment to reduce greenhouse gases.

The opportunity did call for a few tweaks to the original plan. With a government committed to immediate, direct investment of taxpayer dollars, Desjardins-Siciliano realized that his scheme of public-public partnerships would be faster to negotiate than the typical P3 arrangement. In effect, he turned to a much simpler equity model that would leverage the government spending, by attracting direct investments from Canada’s huge public pension funds.

And then, he topped his reformulated confection with the irresistible cherry of end-to-end electrification. Running trains on clean, self-sustaining power, drawn from Quebec’s subarctic rivers, would deliver more than economic stimulus; it would simultaneously satisfy Trudeau’s climate promises, cheaply and quickly.

Though at the time of his recent interview with Railway Age the government had yet to announce the specifics of its green transportation investments, Desjardins-Siciliano was confident enough in his new railway project to call it a “poster child” for national economic and climate policy. The VIA CEO laid out the project’s economic, social and political rationale, as well as key technology parameters that will find expression in eventual invitations to bidders.

“We believe this is to be a transformational project that will change the way Canadians move within the densely populated economic corridor between Quebec City and Windsor, Ont.,” Desjardins-Siciliano said. “The first phase would start with, at a minimum, Montreal, Ottawa and Toronto, although extensions to Quebec City and Windsor can be included initially or soon thereafter. Because it is such a transformational project, we believe it will be looked upon favorably by our new shareholder.”

VIA Rail’s “new shareholder,” of course, is Trudeau’s Liberal Party government. The railway, like Amtrak in the U.S., is owned entirely by taxpayers, though that burden could be shared with direct investments by the pension funds, which would share both the risks and the returns on their investments.

“This project aligns perfectly with the government’s environmental, social and economic agendas,” said Desjardins-Siciliano. “It is a low-cost project; it aims at accessibility and affordability for Canada’s middle class; it creates a knowledge corridor for the more than 500,000 post-secondary students who live within it; it will reduce car congestion on the highways by the equivalent of 5 million car trips per year. That, in carbon production, is like taking 2.4 million cars permanently out of the car pool.”

Low-cost? Yes indeed, to those who correctly consider C$4 billion to be a bargain for a 600-km railway, with 18 daily departures each way. The financial magic in VIA’s Corridor plan is that there is no technological mystery to it: It eschews the cost and environmental disruption of high-speed rail in the Japanese, Chinese and European fashion. Instead, it relies on out-of-the-catalog technologies to provide “fast and frequent” service that will easily outrun private passenger cars, but not pointlessly compete with airplanes.

Assembling the right-of-way and building roadbed, trackage and signaling will cost C$2 billion. VIA already owns more than 200 km (125 miles) of the route, having previously acquired CN’s and Canadian Pacific’s Coteau, Quebec to Brockville, Ontario main lines via Ottawa.

As recently as the end of 2015, VIA purchased the Smiths Falls to Brockville portion of the line from CP, after investing some C$20 million in tenant improvements over the years, including new passing tracks, curve realignments and centralized traffic control. CP retains its Smiths Falls freight yard and running rights to connect with its Montreal-Toronto main line. That, perhaps, is a model for additional purchases of underutilized freight tracks between Montreal, Ottawa and Toronto. VIA anticipates acquiring a mixture of low-traffic freight lines and abandoned rights-of-way.

The shopping list for locomotives and passenger cars adds up to another C$1 billion. After courageous experiments with untested technologies including whining, aircraft-engined Turbo Trains and finicky LRCs, VIA will opt for tried and true trainsets that will cruise at 180 kph (110 mph).

The final billion-dollar tranche actually makes the project a more irresistible deal for a government determined to meet its international commitment to cut greenhouse gases. The Corridor will be, by far, the longest electrified railway in Canada—drawing clean, green power from existing hydroelectric facilities in Quebec’s far north.

While electrification was a nice option in the 1.0 version of Desjardins-Siciliano’s vision, it became a must-have upgrade in light of Trudeau’s ambitious commitments at the December climate change conference in Paris.

“Whether to electrify is less an operating issue than a broader national policy choice,” said Desjardins-Siciliano. “The operational advantages of electrification are not really material in terms of time savings or energy costs. But I think we will all agree that it is the right thing to do. If our shareholder is keen on reducing Canada’s carbon footprint, then electrification is a natural.”

Electrification certainly makes sense in Canada, but why not, while we are at it, opt for “true” high-speed rail (300-320 kph) instead of higher-speed (180-220 kph) service operating on a more “conventional” right-of-way?

“The potential for a good return on investment is determined by the cost at entry, not the price at exit,” said Desjardins-Siciliano. “The price of entry here is much lower than that for a high-speed project. Therefore, your potential for a better return is greatly enhanced. The C$4 billion price tag drives 7 million passengers a year—up from 2 million, now. That compares to a C$10-$12 billion investment in high-speed that would only drive 10 million passengers.”

“High-frequency trains at top speeds of 180 kph mph can be done quickly and cheaply, vs. a high-speed project, which would cost more, take more time to build, and which would ultimately have a consumer price tag that excludes the middle class,” he said. “As we see in Europe, the ticket price for a high-speed train would be equal to or greater than airfare [between the same points]. Therefore, it would only serve those who can afford it, and it would only tie together major urban centers, not cities in between. Our project delivers trip times for Montreal-Toronto of 3.5 hours, Ottawa-Toronto in 2:45, and Montreal-Ottawa in 1:20. The last high-speed train study put Montreal-Toronto at just under 3 hours, Ottawa-Toronto at 2.5 hours and Montreal-Ottawa at about 1 hour.

“We don’t believe high-speed is worth it: Better times would still be made by planes at no financial advantage to the consumer, and without being disruptive to the economic mix and redundancy required from a national transportation system. We are convinced that the greatest contribution we can make is taking those 5 million car trips a year off the highways, making Canadians more productive by not wasting time in highway bottlenecks and enhancing their safety, and making an economic contribution to Canada by allowing freight and passenger trains to run independently and efficiently.”

The key success factors are frequency and reliability, believes the VIA CEO. Of the 18 or more departures daily each way, some would be Montreal-Toronto expresses, others stopping only at Ottawa, and most including service to smaller local communities along the way. “The key reason this project can be done so quickly is that it is based on abandoned or little-used rights-of-way,” he said. “We save ourselves environmental studies and a lot of time building crossings and the rest of it. What we have to do is upgrade the track for greater speeds and introduce better signaling. Some of those are dark territories or have signals too far apart for passenger speeds. We will add double-track where necessary, and long passing tracks where that makes more sense. The other beauty for the government is that this is a shovel-ready, quick-deployment project.”

How to fund it

The Corridor project is also money-ready, believes Desjardins-Siciliano, who has, over past months, pitched the project to Canada’s big public pension funds, which look for safe, long-term returns. Most are already experienced investors in passenger rail. Ontario’s teachers and municipal workers pension funds jointly own the United Kingdom’s HS1 high-speed railway connecting London’s St. Pancras Station to the Channel Tunnel. PSP Investments owns a substantial share of CN on behalf of present and future retirees of the Royal Canadian Mounted Police, the Canadian military and the federal public service.

Perhaps most pertinent to VIA’s Corridor project is the recent investment of US$1.5 billion for 30% of Bombardier’s worldwide railway business by Quebec’s Caisse de dépot, which manages the province’s universal pension fund. An additional side bet on VIA’s Corridor railway could enhance the Caisse’s Bombardier investment, should the Quebec-based company secure some of the action.

Desjardins-Siciliano calculates that as little as one-quarter of the total cost would come from the government’s infrastructure budget, with the balance from the pension funds. And since, in any event, the government would have to spend C$1 billion on rolling stock, just to keep its current service running, “we believe that the inevitable and unavoidable C$1 billion investment in new rolling stock can be leveraged by generating C$3 billion of non-government funding to create an altogether much better public service,” he said. “We believe the optimum structure is one in which the construction risk, the operating risk and the revenue risk are shared between the government, through VIA Rail, and financial partners. That is the one we would favor. But we are agnostic on the financial structure: What we want to see is a dedicated corridor to serve more people more frequently, to reduce the burden of VIA on the Canadian taxpayer, and to enhance the relevancy of VIA’s service to more Canadians. The government will decide how best to address this opportunity.”

Desjardins-Siciliano believes VIA’s Corridor would actually reduce the government’s annual subsidy: “The Corridor would become self-sufficient, so that the subsidy, which is tagged today at more than C$300 million, would come down to about C$110-$120 million, to subsidize the long-haul services and the remote services. Over time, the contribution of the Corridor would be sufficient to absorb a large part of the other VIA services.”

For a government needing to rapidly stimulate an economy that became financially and psychologically over-dependent on high oil prices, time is of the essence. The full railway could be built in just three construction seasons, said Desjardins-Siciliano: “The start date depends on which financing model you choose. If it’s a P3, it’s going to take 12-18 months to select partners and negotiate. If it’s a conventional equity model, in which public pension funds come in as minority players, you can have your shovel in the ground within six months.” The pension funds are poised to jump in, he said: “We have secured their interest in participating, should the government go forward.”

So are rolling stock manufacturers and infrastructure contractors. Projects of such scale attract international bidders with wide scopes of competencies, so that VIA passengers should expect to be riding a cosmopolitan blend of technologies and engineering.

Train manufacturers likely to bid, alone or in combinations, include Bombardier (Canada), Siemens (Germany), Alstom (France), Hyundai Rotem (South Korea), Talgo (Spain) and CAF (Spain). Montreal’s newest rubber-tire Métro cars, for example, consist of Bombardier carbodies riding on Alstom bogies.

As for roadbed, trackage, signaling and electrification, a number of global engineering firms can be expected to bid, including AECOM (U.S.) RailWorks (U.S., with its Canadian subsidiary PNR RailWorks), Parsons (U.S., with its Canadian subsidiary Delcan) and WSP | Parsons Brinckerhoff (Canada), as well as Bombardier, Siemens and Alstom, which have engineering subsidiaries of their own.

“Canadians are reaping tremendous benefits because of the significant investment in mass transit over the past 50 years and in the past decade, in particular,” said Mark Patterson, president of RailWorks passenger rail subsidiary L.K. Comstock National Transit. “The proposed railway represents an exciting opportunity for Canada to make another forward-looking investment in public transportation.”

There is only one substantial electrified passenger line in North America: Amtrak’s Boston to Washington Northeast Corridor and its Keystone Corridor extension connecting Philadelphia and Harrisburg, which, on some sections, operates at VIA’s anticipated 180 kph top speed. In California, Caltrain is electrifying and purchasing new trainsets for its San Francisco-San Jose corridor.

“Commuter rail is already enjoying a huge renaissance in Canada, so intercity rail is coming back in a big way,” said Paul Nimigon, WSP | Parsons Brinckerhoff, Vice President for Rail Projects. WSP is Canada’s biggest homegrown railway design and engineering firm, and is heavily engaged in Metrolinx’s ambition to electrify the web of commuter lines centered on Toronto’s lavishly revitalized Union Station—a 1927 beaux-arts beauty. Union Station electrification is clearly key to VIA’s project.

Montreal’s underground Central Station is already equipped to serve Canada’s only existing electrified railway, AMT’s 1918-built Deux Montagnes line, which bores 5 km (3 miles) through Mount Royal.

“The biggest obstacle to VIA’s Corridor project is a negative public and political perception of Euro-style, high-speed rail,” said Desjardins-Siciliano. “We have convinced ourselves, throughout 30 years of looking at high-speed projects, that they would be extremely expensive to build and would serve only the terminal cities, and at the expense of airlines. So, to all of a sudden come up with the notion that we can build in four years for C$4 billion what we always thought would take 10-12 years and C$10-$20 billion is an intellectual challenge.”

VIA seems to have convinced at least one high-level thinker. NASA Space Shuttle astronaut Marc Garneau, now Canada’s Minister of Transport, uses VIA’s existing service to commute weekly between his home in Montreal and the national capital. Perhaps he secretly sympathizes with a predecessor (Trudeau père’s transport minister, Jean Marchand) who infamously said, “The best thing about Ottawa is the train to Montreal.”

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