Feds step in to restore rail service to Churchill

(Jade Markus photo for CNS Canada)

CNS Canada — The federal government says it’s prepared to restore rail service to Hudson Bay at Churchill, Man.

The Hudson Bay Railway, running from The Pas to Churchill, was closed in the spring of 2017 after flooding damaged multiple sections of the route to the northern Manitoba community.

U.S. rail operator OmniTrax, the line’s current owner, has said repairs would cost as much as US$60 million and it wasn’t prepared to pay without government assistance.

Churchill town officials have maintained that the line is a public utility and must be repaired before winter arrives. Some residents travelled to Winnipeg to hold protests over the issue.

Prime Minister Justin Trudeau has previously said Denver-based OmniTrax had legal obligations to restore service to the community.

However, the government said Friday it’s prepared to “facilitate discussion for the transfer of the rail line to a new owner and will work with that new owner to restore rail service.”

The government said it’s “deeply concerned” OmniTrax hadn’t yet started repairs on the line, and that “further delay may jeopardize the ability to complete repairs before winter.”

At least two different groups of northern Manitoba First Nations have expressed interest in taking over the line.

The Manitoba government said Thursday it would be willing to pay as much as $500 million over 10 years to fix the line and maintain service, though it wasn’t initially clear how much of that money would be entirely new.

The federal government said Friday it’s prepared to act quickly to provide support, if:

  • The rail assets are transferred at a reasonable price, taking into account OmniTrax’s obligations;
  • The line’s new owner has support from First Nations and other communities along the route; and
  • The new owner has a viable business plan to operate the rail line safely, reliably and cost-effectively.

Ottawa said it will also “engage” with the province as a partner in “supporting service restoration and go-forward operations.”

“It is about time both levels of government recognized the plight of Churchill and stepped up to ensure the rail line repairs begin immediately,” Tom Lindsey, the NDP MLA for the northwestern Manitoba riding of Flin Flon, said in a separate statement Friday.

Lindsey, whose riding includes a short stretch of the Hudson Bay Railway from The Pas to Churchill, said the situation is “urgent and serious” and “the window to complete repairs is rapidly closing.”

The federal government on Friday also named lawyer Wayne Wouters as its chief negotiator, adding that he’s expected to play a “key role” in discussions with OmniTrax, interested buyers, community leaders and the province.

OmniTrax bought the government-owned port and Canadian National Railway’s (CN) rail line in 1997. Both were built in the 1930s to serve northern communities and provide an alternate shipping route into and out of Western and central Canada.

The federal government said Friday its 2008 agreement with OmniTrax calls for federal financial support to the Hudson Bay Railway, for which OmniTrax in return was to maintain and operate rail service through to Churchill until 2029.

Grain exports

Churchill, as Canada’s only deep-water Arctic seaport, moved 184,600 tonnes of grain during its 2015 shipping season, well off its average of 500,000 tonnes. OmniTrax shut down port operations and laid off its staff before the 2016 grain shipping season.

The port and rail line have also long been considered a vital link for Canada’s North, taking food, equipment and containers to Churchill for distribution to points further north via Hudson Bay.

From a grain export perspective, routing grain out of certain areas of Saskatchewan and Manitoba through Churchill instead of Thunder Bay is believed to shave up to three days off voyages to some ports in Western Europe.

Churchill’s ice-limited shipping season, typically July through October, has been a benefactor of global warming in recent years, but warmer weather also makes the rail line, much of which is built on permafrost, less stable.

Churchill’s grain handle was expected to decline after its main customer, the Canadian Wheat Board, lost its single marketing desk for Prairie wheat and barley in 2012.

Ottawa that year budgeted for up to $25 million to provide a $9 per tonne subsidy to encourage exporters to use Churchill, but that incentive program expired earlier this summer.

— Dave Sims writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting. Includes files from AGCanada.com Network staff.


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