2 July 2004 Canadian Pacific to Drop Buffalo Rail Yard BUFFALO, N.Y. -- Canadian Pacific Railway will cease operations at its rail yard in Buffalo and shift its freight handling chores to Norfolk Southern in a cost-cutting move, the company said Thursday.   An important shipper on routes to the West Coast, Canadian Pacific said it will continue running trains through Western New York and providing service to local shippers.   "It's not as though (Canadian Pacific) is withdrawing," spokesman Paul Thurston said. Some workers at the Buffalo yard may transfer to other areas, he said, and any layoffs would be minor.   CP leases a portion of Norfolk Southern's SK yard south of William Street to handle local operations. Its employment at the yard "is probably a relative handful," Thurston said. The hand-over of operations should be complete by the end of summer.   CP has about four daily trains running through the area on tracks leased from Norfolk Southern, according to the Erie County Industrial Development Agency. Freight destined for Buffalo-area customers must be interchanged with other carriers for delivery. The major rail services in the area are Norfolk Southern and CSX.   The hand-over of yard operations is part of a consolidation plan that will save $15 million a year for the Calgary-based railroad and bring its money-losing Northeastern U.S. network closer to profitability, officials said.   The plan must be approved by the federal Surface Transportation Board, which is thought to be forthcoming because service won't be curtailed.   The Buffalo move is part of a swap that consolidates rail operations around the state. In Binghamton, Canadian Pacific will handle yard operations for Norfolk Southern.   In addition, Norfolk Southern will haul Canadian Pacific freight between Buffalo and Binghamton under a haulage agreement. In northern New York, Canadian Pacific will haul Norfolk Southern freight between Saratoga Springs and Rouses Point on the Canadian border.   Canadian Pacific, Canada's No. 2 railway, said last year that it doesn't do enough business on the routes to justify its cost and took writedowns that cut its earnings by $56 million. The company will save on labor and equipment costs after Norfolk Southern assumes the route.   Norfolk Southern also will begin using a shorter route to Montreal and eastern Canada over Canadian Pacific tracks north of Albany, the companies said. The agreement also will shift Canadian Pacific cargo traveling between Chicago and Detroit to Norfolk Southern's route.   "CP Rail's eastern operations have much lower levels of profitability because of lower volume and higher levels of competition with trucks," said Robert Fay, a Concordia Capital analyst, in a report.   Fay said investors may view the move "as a precursor to a sale or merger of CP Railway's eastern operations with Norfolk Southern."   The agreement "appears to be a positive move for CP Railway to boost its profitability," he said.   The SK yard in Buffalo gained notoriety last year when a garbage train was stranded there by a financially troubled disposal company. Canadian Pacific was hauling 458 containers of New York City garbage on behalf of Chem-Rail Logistics of Glens Falls.   The train's nearly year-long stay before being removed last summer prompted an outcry from residents of the Clinton-Bailey neighborhood.