The first railway in British North America, the Champlain and St. Lawrence Railroad, was built in the 1830s to 5 ft 6 in (1,676 mm) track gauge (today known as "Indian gauge"), setting the standard for Britain's colonies for several decades. Well-known colonial systems such as the Grand Trunk Railway and Great Western Railway, along with the Intercolonial Railway, European and North American Railway and Nova Scotia Railway later expanded the use of broad gauge. In 1851 the 5 ft 6 in (1,676 mm) broad gauge was universally adopted as the standard gauge for the Province of Canada, and government subsidies were unavailable for railways that chose other gauges. The broad gauge was used until the early 1870s, after which time there was a gradual change of the industry to standard gauge over several years. However, each railway had to change quickly, coordinating locomotive and track replacement with rolling stock replacements or upgrades. The notion that rolling stock could earn money while on other railways had become attractive, and this spurred standardization.
The rise in standardization with the US came about because of increasing trade across the border after the American Civil War. Some railways had installed dual gauge track, which was expensive, and others used variable gauge wheels, which proved unreliable. The Grand Trunk system started converting its border lines in 1872 and finished converting its lines east of Montreal in 1874. The Canadian government-owned Intercolonial Railway converted from broad to standard gauge in 1875 while still under construction.
After the 1870s, the Canadian Pacific Railway (1880) and most major new lines were built to the standard gauge, including all the railways built through the Canadian Rocky Mountains to the Pacific coast. In addition to the CPR these included the Grand Trunk Pacific Railway, the Canadian Northern Railway and the Pacific Great Eastern Railway. The latter three were eventually acquired by Canadian National Railway, which is now the largest railway in Canada. All remaining Canadian freight railways use standard gauge.
In Toronto the Toronto Transit Commission subways and streetcars use 4 ft 10 7⁄8 in (1,495 mm) gauge, making their equipment incompatible with standard gauge rail systems, including Toronto's own Scarborough RT system. Ten years before standard gauge was established in Canada, but after it had been established in England, this unusual gauge was chosen to accommodate horse-drawn wagons on the streetcar tracks. The Articles of Agreement signed in 1861 between the City of Toronto and the Toronto Street Railways required "That the gauge of the said railways shall be such that the ordinary vehicles now in use may travel on the said tracks". There was no mention of a specific track gauge, but because ordinary wagon wheels did not have a flange, they could not travel on the same rails as conventional streetcars. To meet the requirement, the streetcar tracks were placed wide enough apart so that ordinary wagon wheels could run on the inside step of the tracks. (In practice, the five miles of T rail had no such step.[1]) This resulted in Toronto streetcar tracks being slightly broader gauge than standard-gauge tracks. Later, when the Toronto subway was built, it was designed to use the same track gauge as the streetcars. This provided for sharing of rail equipment and maintenance facilities, and provided for future use of 'subway-surface' cars that could pass between systems. However, only a few streetcars have ever been used on the subway system.
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