With little time to waste a new player has surfaced in the crucial sale of the Port of Churchill to two independent First Nations groups in the north. Investment firm Fairfax Financial Holdings from Toronto hopes to partner with One North and Missinippi Rail LP to wrest ownership from Denver, Colorado-based Omnitrax and set forth in motion the extensive repairs to the Hudson Bay Line damaged by severe flooding last May.
The Port of Churchill may be under new ownership soon. CBC News photo.
The new prospective partner will also bring a financially sound backing and a strong business base to the deal that Churchill officials and residents hope will secure access to the south and free them from isolation.
According to reliable sources, a negotiator for the federal government, former clerk of the Privy Council Wayne Wouters, has brokered a deal with the two potential owners.
“This development has the potential to contribute to an arrangement supported by First Nations and communities in northern Manitoba,” Natural Resources Minister Jim Carr said in a statement released Thursday.
“This would enable a sustainable business approach that results in a safe and reliable rail line.”
Paul Rivett, president of Fairfax Financial Holdings, said “we are optimistic about the prospects of northern gateways.” stated in a press release.
“The Churchill rail corridor and the Port of Churchill are important pieces of infrastructure for northern communities and to the economy of Canada. Partnering with First Nations and communities is the right model for this investment,” Rivett said.
He said Fairfax will rely on a company it has invested in, AGT Foods, to develop a plan that is “viable and profitable in the long term as a business.”
Earlier this week, Ottawa responded with an $18-million lawsuit against Omnitrax after it filed filed a claim for damages against the federal government under the rules of the North American Free Trade Agreement.
The head of the Fairfax, V. Prem Watsa, has been characterized as the “Warren Buffet of Canada” often investing in troubled companies and turning them into a positive entity. Watsa invested in BlackBerry and Fairfax has significant holdings in several other companies.
Fairfax Financial CEO and chair V. Prem Watsa.CBC News photo.
Omnitrax signed a memorandum of understanding with First Nations Consortium Missinippi Rail in June and then joined forces with One North to strengthen interests in purchasing Omnitrax’s Manitoba assets.
Churchill Mayor Mike Spence, in a written statement to CBC News, said transferring the port and rail line to a stable, strong northern regional ownership group is the highest priority. He is behind the efforts to find a partner to purchase the assets one hundred per cent.
“I am pleased that there are outstanding companies that also share this vision. We now need the negotiations expedited and [to] ensure our preparations for repairs to the rail line and port are ready for the 2018 season,” wrote Spence.
Omnitrax, owner of the Port of Churchill and the damaged Hudson Bay Rail – Line, has apparently obtained an assessment of the severely damaged railroad tracks between Gillam and Churchill. After meeting with Transport Canada officials this past Monday, Omnitrax seems to have a clearer notion of what it will take to repair the tracks.
The company has not yet released the findings and any strategic, updated plan to commence work in the near future. After 13 weeks of inoperability, the Hudson Bay line still sits damaged by spring floods resulting from two historic March blizzards. An August 4th updated engineering report detailing estimated costs for repairs was obtained by Omnitrax though they vowed to divulge the findings only after meeting with Transport Canada.
In early July, repair estimates by Omnitrax ranged between $20 and $60 million which they emphatically stated were “not economically viable”. However, the Canadian government continually insists that the company is responsible via federal transportation laws to keep the lifeline to the north running. Transport Canada, the enforcing agency for the law will not initiate an investigation until it received specific complaints from citizens and other agencies.
Correspondence so far from complainants has not been addressed directly to movement of goods and rail line abandonment prompting responses from some Churchill residents that Ottawa and Omnitrax are dragging their feet in the process. Telling Churchillians they have basically not “complained properly” is not sitting right with many of the distraught residents.
Damaged Hudson Bay rail line. CBC photo.
Churchill Mayor Mike Spence, mayor of Churchill, instead of encouraging residents to file complaints with the regulator has instilled trust in Prime Minister Justin Trudeau. Trudeau pledged he would find a solution on July 28. Trudeau, however, hasn’t said how he plans to proceed.
Home Hardware owner Rhoda deMeulles exemplifies the business owners woes in town by expressing her frustration on lack of supplies due to no cargo arriving via rail. “It’s hard to realize what you need all at once,” said deMeulles, whose store is close to running out of construction supplies and cash.
“We feel like we’re in jail,” said deMeulles, who still loves the town she adopted 38 years ago. “We need help; we need our rail line back.”
Something has to give as the government continues to subsidize groceries for the town. Everyone is expecting a decision by Omnitrax soon, possibly as early as next week.
Tracks have been washed out in multiple places between Churchill and Gillam. Mike Spence photo.
Omnitrax, owner and operator of the Hudson Bay Rail line is continuing to seek government and First Nation help to fix the only land access to Churchill. Estimates of $60 million would restore the tracks to operation by the end of October. However, Omnitrax says they can’t and won’t do it alone!
“It [the rail line] is not commercially viable, so we believe it’s a public utility,” said Peter Touesnard, chief commercial officer for Omnitrax.
“We believe it’s still the least expensive way to supply service to the north, in particularly the community of Churchill, and we believe there is a role for the public to play in that.”
Peter Touesnard, chief commercial officer for Omnitrax. Jaison Empson BBC photo.
Two March blizzards of epic proportions melted this spring into widespread flooding across the tundra from Gillam to Churchill. Water flows across the land since permafrost lies just beneath the surface and it does not percolate into the soil though. Instead, it flows across the land and when enough accumulates it can move with a powerful force destroying man made features in its path. The ensuing damage to the tracks between Gillam and Churchill have caused a storm of even greater proportions.
With the crucial lifeline to the town inoperable and the main shipping line for goods and supplies cut off, food prices have dramatically increased and businesses have been forced to lay off staff due to soaring costs of securing the goods for their business to operate.
A written statement from Omnitrax was released on Tuesday via a spokesperson for the office of Transport Minister Marc Garneau:
“Omnitrax has an obligation to repair and maintain its line and maintain service to residents, and we expect Omnitrax to meet its obligations,” the statement reads.
“If Omnitrax fails to meet its obligations, our Government will have to examine what are the next steps and alternatives to ensure residents can get the food and supplies they need.”
Omnitrax announced Tuesday morning, that the company has a 60-day plan starting in September to begin repairing the tracks contingent on securing contractors, housing and resources for the project
Churchill Mayor Mike Spence says the timeline for rebuilding portions of the track and replacing bridges and culverts is leaving very little wiggle room with regards to weather in the north.
“The end of October and that’s it, your construction season is done,” Spence said. “So we’re running out of time, here. Let’s get on with it.”
Churchill Mayor Mike Spence. Jaison Empson photo.
Provincial Infrastructure Minister Blaine Pedersen stated his dissatisfaction with the Omnitrax repair schedule and plan; “Today’s technical briefing provided by Omnitrax was clearly inadequate, leaving many unanswered and hypothetical questions.”
“Our senior provincial officials have repeatedly asked Omnitrax for details about their independent engineering assessment and future intentions of the rail line including timetables respecting necessary mitigation efforts, details of insurance policies and status of claims, to which we have had no response,” Pedersen said.
“What was made clear today by senior Omnitrax officials is that they are not prepared to repair, maintain or operate the rail line. It appears that they intend to abandon the line. If so then it is their obligation to the people of Churchill and indeed Manitobans to communicate their abandonment decision to the federal government.”
A third – party track assessment Omnitrax commissioned was completed by AECOM Canada and the engineering company identified 31 washout areas, 68 culverts and 13 bridges requiring repair over the 300 kilometer run of the track from Gillam to Churchill.
In June the Canadian government approved an extension for the Nutrition North food subsidy program so Churchill would be able to keep grocery prices at a somewhat affordable price until rail service resumes. With Manitoba Health also contributing to the subsidy effort the rate will be at $1.60/kg.
Flooding at Churchill’s Goose Creek subdivision. Riccki O’Connor photo.
Nobody really thought ahead when the massive blizzards were pounding Churchill this past March. When the spring thaw came, permafrost has prevented meltwater from permeating the soil and has lead to major flooding in parts of the tundra from Thompson to Churchill along the Hudson Bay rail line.
Once again, as was during the time of the blizzards, supplies and groceries have been delayed due to lack of train service to the northern community. During the March storms groceries were stranded in the south for three weeks leading to a state of emergency.
“With the spring melt underway, water is everywhere”, said Mayor Mike Spence. “We’ve got historic record water flows coming into our community here. It’s a lot of water coming down,”.
Not expected to peak until early June, the Churchill River, as of last weekend, was flowing at about 160,000 cubic feet per second (cfs). With ice still on the Churchill River the flow of overrun onto land can be unpredictable due to tidal flow and ice jamming along shore.
The Goose Creek subdivision has been flooded up river and volunteers have been furiously filling and placing sandbags to try to contain the water. The tracks over parts of the 100 mile stretch of the Hudson Bay rail line have been completely flooded over and no trains have been through since May 23rd.
“We have a rail problem here where we are not able to use the train system because of damage to the rail line, so that needs to be attended to, and that actually can’t be attended to until the water conditions are dealt with.” stated Spence.
Churchill is working with Thompson’s Calm Air, to work out plans to fly groceries into town as soon as possible!
The Port of Churchill and Hudson Bay Railway are still up for sale by Omnitrax. Claude Daudet photo.
With negotiations between Omnitrax Canada and the Missinippi Rail Consortium, now down to just the Mathias First Nation, moving at the speed of a train on the last 100 miles to Churchill, another strong alliance has stepped up and expressed interest in acquiring the port and Hudson Bay Railway. Omnitrax does have a memorandum of understanding to negotiate the sale of its assets with MRC though the negotiations have recently stalled.
The new alliance called One North has apparently gathered widespread representation from various First Nations of northern Manitoba and incorporated municipalities residing up and down the rail line. The Kivaliq region in Nunavut has also reportedly joined forces with the group as well.
“This is an unprecedented coalition of communities — indigenous and non-indigenous. There is a historical significance here. Never in the history of northern Manitoba have all these communities come together like this in a shared vision.” stated Christian Sinclair, chief of Opaskwayak Cree Nation, and one of the key organizers of One North.
So far around 20 communities have joined forces with One North, including The Pas and the City of Thompson, two key, large communities on the rail line as well as all the First Nation communities served by the Hudson Bay Railway including Fox Lake, War Lake and York Factory. Many of these groups have rescinded their support letters from a year ago backing the Missinippi Rail Consortium run by Chief Arlen Dumas of Mathias Colomb First Nation and redirected them to One North Coalition.
The group has come together to not only purchase the assets of Omnitrax Canada and run the rail line and Port of Churchill but also facilitate a long term broader plan for the north and its people.
Churchill mayor Mike Spence has co-led the effort with Sinclair..
“We have a real issue here. We need to rectify it. We are putting together a model that will sustain these communities for a long, long time.” Spence said.
Omnitrax Canada place the port, rail line and assets up for sale in December 2015. Omnitrax president Merv Tweed at that time announced the company wanted to sell its Manitoba assets and was confident the company would have a deal in place before the end of 2015. That didn’t happen.
Dumas and Omnitrax entered into negotiations in January 2016 and although initial meetings seemed to imply a done deal, nothing has seemed to progress further.
When July came around, Omnitrax shocked the community of Churchill by laying off nearly 100 port workers and abruptly closed the doors to the port and cancelled the entire shipping season. No deal with with Dumas and his group was finalized.
Dumas and Omnitrax officials claim that talks are progressing well and that a deal is imminent though no recent news has surfaced on the deal. Omnitrax officials have not been available for comment on negotiations. When reached, Dumas had no awareness of One North’s interests. He did give away a little of his hand by stating; “Well, ask them to give me a call if they want to buy the assets and the interest off us.”
Sinclair admits One North is still trying to get an audience with Omnitrax. They currently have no official standing with the company and have only assembled a team with some technical expertise including Paul Power, an international railway specialist who was a founding director of the Keewatin Railway Company, and Marv Tiller, the original CEO of the North West Company who has had a long career assisting First Nations in successful economic development projects.
“We think Omnitrax does not want to talk to us because they want to get a management contract from the buyer, Missinippi Rail Consortium, so they can make $10 to $15 million advising and managing and have someone else take on the risk as well as cash out on all the government money that has been sunk into the line.” stated Power.
One North has made it clear to the government the direction they are wanting to go in and have met with Cliff Cullen, Manitoba’s minister of growth, enterprise and trade as well as Natural Resources Minister Jim Carr and the Manitoba caucus in Ottawa. Modest funding has been received from the $4.6-million Churchill and Region Economic Development Fund, established in September by the federal government though the group has been primarily self-funded to date.
“The federal government is fully aware of where we want to go,” Mayor Spence said. “They have indicated to us that they like the model, they like where we are going. It plays into what the government wants to do to develop a new strategic plan.”