Future of the Port of Churchill is a bit foggy. Photo Steve Selden
The Canadian federal transportation regulator ruled last week that Omnitrax Canada is responsible for long-overdue repairs to the Hudson Bay Rail line linking Churchill with the south. The order mandates the tracks restored to usable condition, as quickly as possible.
This new development in the ongoing saga between Port of Churchill owners, Omnitrax, and the government seems to be coming to a crescendo of sorts. Repairs to the Hudson Bay Railroad have been ordered to begin by July 3rd with the additional requirement of filing monthly progress reports on the status of repairs. The Canadian Transportation Agency will be overseeing the project.
According to the transportation regulator, Omnitrax, as the current owner, is bound by a public obligation to restore the tracks and reinstate train service to the isolated communities and the “reasonable pause” in operations has elapsed. The tracks were washed out in May of 2017 due to flooding from two late spring blizzards.
The Canadian Transportation Agency maintains that the Denver-based company was contractually bound to initiate a reasonable plan to repair the tracks the by November 2017. Omnitrax hired an engineering company, AECOM, to assess the damage and then balked at the estimated $60 million estimate of repair costs. Company officials assert the transportation lifeline to the north should be treated as a public utility since commercial ownership of the railway line is no longer viable. The government has been insinuating that Omnitrax is trying to shirk its responsibilities since the time of the flooding.
Omnitrax’s argument continues with the premise that the flood was a “force majeure” event defined as an exceptional happening that nixes the firm’s contractual obligations.
Port of Churchill grain shipping operation on the Churchill River. Port of Churchill photo.
Just when you thought the Port of Churchill and accompanying Hudson Bay Line were in a negotiated sale…again…another potential suitor has arisen to acquire the assets and begin shipping from the port.
Executives from Herun Group Co. Ltd., a Chinese company with massive agricultural interests as well as a wealth of port-operating experience, visited Churchill a month ago to gather more information and inspect the port facility. The company is one of the largest firms in China and seemingly has the financial clout and long-term experience in the shipping industry to offer a long-term solution to keeping the port and train line open.
Concerns that the Port of Churchill would fall into foreign hands and their primary interests would be alleviated by an agreement with the Manitoba Metis Federation and thus have that group own 51 percent of the company. Herun has also agreed to pay the $20 million price to Omnitrax without relying on any additional support from the Canadian government according to Manitoba Metis Federation president David Chartrand.
“Herun made it very clear they’re prepared to come up with a substantial amount of cash,” he said.
Herun owns and operates 11 international ports and recently closed a deal to acquire a port in Brazil, the country China trades the most with. Since Herun also processes various grains and oilseeds, interest in Churchill’s port facility is paramount.
“To me, in order to make this situation work for the railroad and Port of Churchill, you really need to have a company that is in the business,” said Joe Ng, chairman of JNE Group of professional engineers based out of Hamilton, which arranged the tour.
Port of Churchill. Claude Daudet photo.
“Otherwise, new people come in and after two years they can’t utilize the rail and port and they bail out.”
Herun’s interest stems from the fact that it imports raw materials such as soybeans and canola for its China crushing facilities.
Missinippi Rail and One North, a consortium of First Nations and Toronto-based Fairfax Financial Holdings Inc. are also in partnership to purchase the facilities. Omnitrax and Ottawa have been in negotiations with each other since late last year.
However, Omnitrax Canada President, Merv Tweed, reported that the latter group has only signed a letter of intent and Omnitrax has received inquiries from several other Canadian companies. “We are continuing discussions with a number of interested parties,” Tweed said.
A most recent inquiry and potential buyer, another First Nations group named iChurchill, appeared this past week with a comprehensive proposal that includes utilizing Churchill’s port and rail line to ship wood and possibly oil in addition to grain.
Ng conceded Herun is not first in line with their new proposal. “We’ve come in late so we have to wait until other people finish talking. It’s no different than a lineup at a counter,” said Ng, the 2016 winner of Entrepreneur of the Year awarded by the Association of Chinese Canadian Entrepreneurs.
Any new deal with the prospective buyers would include the damaged rail lines, as well as some buildings and land and in other northern towns like Gillam. The estimated $46 million in track repairs would be covered by the company that ends up purchasing the facilities. The governments annual $5 million in maintenance payments currently paid to Omnitrax would continue with the new owner.
Even though Churchill has a pretty short shipping season, Herun is looking ahead to the future according to Ng. “As far as they’re concerned, the world’s turning warmer every year, and there might be longer and longer shipping seasons as years go by,” he said.
One of the Hudson Bay Line’s washouts between Gillam and Churchill. Omnitrax photo.
Omnitrax does not have the resources to repair the Hudson Bay Railway and is urging the Canadian Government to get involved to help get the trains running again according to Merv Tweed, President of the company’s Canada management team.
“We’ve said publicly that we believe the province and the federal government have to be involved in this. It is a natural disaster,” Omnitrax Canada president Mervin Tweed said Friday.
Omnitrax is claiming there are at least 24 track sections between Gillam and Churchill, Manitoba that were severely damaged during the spring thaw and floods. Given the complexity of accessing the tracks and the permafrost base they lay on, the company is forecasting spring 2018 as the earliest time the repairs will be completed.
Flooding has caused some of the Hudson Bay Rail line to be underwater. Omnitrax photo.
Omnitrax has conducted aerial photo surveillance revealing long stretches of water submerged tracks, culverts displaced and suspended tracks above the ground with water running under them. This type of damage will be difficult to repair with expediency and forethought for future flood damage.
The Canadian government has not committed to any help before knowing what the costs will be.
“I mean, they’re being cautious. It’s hard to do something until you know — like us — what it’s going to cost,” said Tweed.
Omnitrax-Canada President Merv Tweed says government needs to be involved in repairing the rail line. CBC photo.
The Hudson Bay Railway is a lifeline between Churchill and the south. Trains typically bring up everything from fresh groceries to propane gas for heating homes. as well as building materials and anything else needed by residents and businesses. Without this service the economy and lifestyle in Churchill will be drastically affected.
The assessment, including 300 kilometers of tracks, 28 bridges and 600 culverts is beginning this week will take four weeks to analyze the tracks and two more to provide a comprehensive report detailing the process of repairing the line.
Tweed estimates the cost will be far larger than what Omnitrax can afford for the project.
“We don’t believe we have the resources to rebuild what needs to be done,” said Tweed. “Every time we go out we find something else.”
A difficult job ahead for engineers includes walking along the tracks and checking the stability of the line as well as taking soil samples in order to determine ground conditions under the tracks.
“Just getting to that site is going to be a real challenge,” Tweed said.
The tundra north of Gillam is saturated and many areas are covered with water slow to be absorbed by the permafrost – covered ground.
In the meantime, while the track is unusable north of Gillam, a plan to utilize both the Port of Churchill and the town’s airport is being assessed and put in place to cover the shipping deficiency.
Tweed stated that some port, owned by Omnitrax, employees have returned to work in preparation for aiding with additional shipments.
“We were optimistic about a pretty good rail season until the water hit,” Tweed said.
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.”
Railroad ties owned by Omnitrax in the Pas were destroyed by arson. RCMP photo.
A $5,000 reward is being offered by Omnitrax Canada for information that helps locate an arsonist that destroyed about $1 million worth of railroad ties that were to be used this summer on the Hudson Bay rail – line.
Fire lit up the sky around 5:30 a.m. in The Pas Monday morning from the Hudson Bay Railway yard. With relations strained between local residents and Omnitrax due to their recent abandonment of the Port of Churchill, communities all along the Hudson Bay rail-line are running high on emotions.
Omnitrax will offer the bounty to someone who can supply information leading to both an arrest and conviction of the person or people responsible for the fire. Fortunately, no people were injured during the blaze.
“We are very troubled by this terrible act,” Omnitrax Canada president Merv Tweed said in a release.
The company has set up a tip line at 204-947-0033. The local RCMP number is 204-627-6204.