Canadian High Speed Rail: More Promise than Reality?

By Robert Presser on September 9, 2010

There are two figures readers need to keep in mind as they contemplate the possibility of boarding a 250 km/h train between Montreal and Toronto: 511 and 19.  The 511 is the number of kilometers of High Speed Rail (HSR) that Brazil plans to build to link its largest cities, Sao Paulo and Rio de Janeiro via Campinas.  The 19 is the number of billions of US dollars this project is likely to cost.  The Brazilians deserve a great deal of credit for not hiding the truth from their population as to the cost and complexity of the project.  Creating HSR in Brazil is essential to relieving pressure from Brazil’s overcrowded airports and its decaying roads, which are overwhelmed by crowded buses that fight with the truck traffic between the two massive population hubs.

train.jpgCreating HSR in the Quebec City to Windsor corridor is not essential to solving a pressing Canadian transportation crunch because none exists at the moment.  We have rebuilt the major airport hubs of Montreal and Toronto, our highways are in good shape along the corridor and train travel between Toronto and Dorval is already possible in four hours.  Some travelers may not consider four hours to be a competitive time, but anyone who has tried to get between YUL and YYZ at peak travel times is not doing much better when all the waiting and ground travel time is factored in.  Furthermore, the federal government is currently undertaking $350 million dollars of rail infrastructure improvement between Toronto, Montreal and Ottawa that will re-route freight traffic and improve sustained speeds on the tracks, reducing travel times even further.

So what pushed Jean Charest and Dalton McGuinty to hold a press conference this past June to commit to a central Canadian HSR project?  The Americans and the environmental lobby made them do it.  The Obama administration has committed $8 billion in federal funding to develop a series of HSR corridors across the US, including Boston or New York to Montreal, and a link to Buffalo that holds the potential for a quick zip around the lake to Toronto.  If Canada fails to announce projects to integrate with the planned US network, then routes may not be laid out with later Canadian interconnectivity in mind and may prove uneconomical or impossible once US plans are complete.  Secondly, electrified train travel is considered to be a green initiative and Canadian politicians want to be seen to be removing pollution-emitting private vehicles from the road and packing 600 people into a train counts towards saving the planet.

The last HSR study evaluated the cost of the project in central Canada at $25 billion when adjusted for inflation.  Who is going to pay this bill?  Any government money committed to the project will be met by howls of protest by the airlines, as Air Canada and Westjet may not be viable without the cash cow provided by Montreal to Toronto travelers.  The airports are now in private hands and their investors will object to having the governments subsidize VIA rail (or some other entity) with free infrastructure.  The airports were built with federal tax dollars, true, but their current owners will take the position that this occurred years ago when air travel was considered a strategic asset for promoting economic growth and besides, they paid fair market value when the airports were privatized and full price for all the improvements since.

Doing the math for simply a Montreal to Toronto link shows how difficult it would be for a private entity to fund the project.  Current electrified HSR track costs about $25 million per mile, so for 500 kilometers the rail alone is worth $12.5 billion.  Train sets, including passenger cars and locomotives, cost anywhere from $25 to $40 million each.  Let’s say that we need 40 train sets at $30 million each, for another $1.2 billion.  Add another $1 billion for station upgrades along the line and we have a total price of $14.2 billion for the major Montreal to Toronto link.  If we decide to divert via Ottawa and bypass Kingston, figure another 100 km of track for an extra $2.5 billion – now our total is $16.7 billion.  If the whole network was supposed to cost $25 billion from Quebec City to Windsor, you can see that the calculations above are reasonable.

Under the assumption that a private corporation could finance this deal at an 8% cost of capital, it would cost about $1.3 billion per year in interest payments.  If passengers were to dedicate $50 of each train fare to debt service, then that would represent 26 million one-way trips.  Just for comparison basis, the Montreal to Toronto air route is currently the 15th busiest in the world, with 480 flights per week – representing approximately 3.75 million one-way trips per year.  Even if you add in a million or so VIA travelers and converts to rail, we can’t even compare 5 million potential travelers on the train, if all air travel disappears, with the 26 million travelers needed to make a reasonable contribution to carrying the debt.  So, as a purely private enterprise, true electrified HSR is a non-starter.

We need to explore HSR with a more modest approach.  First, we need new train sets that can make the best time between the major cities on the upgraded, non-electrified track that will soon exist in the Montreal-Ottawa-Toronto triangle.  Bombardier had developed a jet-train engine that was designed to mate with existing HSR passenger wagons for use on non-electrified track.  Called the JetTrain, it even made a demo run in Canada ten years ago.  Our first step towards testing the viability of HSR in Canada would be to allow VIA to purchase 20 to 30 train sets using a high speed jet-type locomotive (under a competitive bidding process, please) to replace the existing LRC train cars that VIA has lived with since the early 80s.  This semi-high speed train could probably reduce the Montreal-Toronto trip to approximately 3 hours, which for most people is competitive with the airlines.  The airlines would stay quiet since they would not want to be accused of attempting to stifle competition and the LRC train sets require replacement in any case, after major refits that extended their lives to this point.  With these modern trains running on existing rail, we would get a real idea what the potential ridership is in the Quebec City-Windsor corridor and further investment in electrification or dedicated HSR tracks could be made with greater certainty and fiscal responsibility.

Our American HSR partners are also likely to come to the conclusion that certain segments of track do not merit immediate electrification.  For example, the route north of Albany to Montreal will be very expensive to build and operate, and the only way to make it economically viable may be to push off the electrification phase until later.  Even if the Americans decided to electrify the entire network immediately, there could be an engine change at the border to allow train sets to continue into Canadian territory with only a few minutes delay for passengers.  A hybrid system could exist for a long time and would allow HSR train sets to run on conventional rail in areas where dedicated HSR infrastructure would not yet exist.

It’s nice for politicians to have dreams and a vision for a greener future.  In the case of HSR, however, they should remember the private sector consortium that went bankrupt building the Chunnel under the English Channel to connect London and Paris.  The Chunnel project should never have been privately financed, but today, governments cannot afford to take such enormous risks with the dollars of fatigued and skittish taxpayers.  There is a viable scenario for bringing HSR to central Canada and the US northeast, as long as our leaders dare to dream a little smaller.


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