Rehabilitation efforts at North America’s only deep-water Arctic port are still underway, but there are expectations business through the facility will eventually include grain as well.

OmniTrax, the previous owner of the port and rail line servicing it, abruptly halted grain shipments in the 2016 season, after less than 200,000 tonnes moved through the facility the previous year. Grain movement had slowed since the demise of the Canadian Wheat Board’s single desk in 2012.

Sections of the rail line washed out in 2017 and were left in disrepair until the Arctic Gateway Group (AGG) took over in 2018 and began repairs. AGG is a partnership of Indigenous First Nations and other northern communities, Toronto financier Fairfax Financial Holdings and Saskatchewan-based pulse company AGT Food and Ingredients.

“It’s great to see goods arriving by freight train to the port and loaded for export,” Churchill Mayor Mike Spence said in a release, adding “we have a lot of work to do to continue the reinvestment in the Churchill port and Hudson Bay railway, but today is a great day.”

Elden Boon, head of the Hudson Bay Route Association, which advocates for moving grain through the facility, had heard of modest grain shipments slated for this season.

“We’re optimistic,” said Boon, adding “we knew that things were in pretty dire straits when (AGG) took over.

“When we look down the road, two, three, or four years, I think we’ll see significant amounts (of grain) through there,” said Boon, adding “Churchill has always been a surge port… In years of high production, we always saw larger shipments out of Churchill, and I’m assuming it will continue down that road.”

The HBRA is holding its annual meeting in Flin Flon Aug. 6-7. “This will be the first positive one we’ve had for three years or more,” said Boon.

AGT Foods has previously said it expects to see wheat, canola, lentils and other commodities shipped through the railway and port.

While future grain shipments are a consideration, the current focus is on the Arctic re-supply business and on repairing the rail and port facilities, Omer Al-Katib, director of corporate affairs and investor relations with AGT Foods, said Wednesday.

“We’re taking a very measured approach on what’s being done,” he said.

— Phil Franz-Warkentin writes for MarketsFarm, a Glacier FarmMedia division specializing in grain and commodity market analysis and reporting.

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Hudson Bay Railway (HBR), a subsidiary of Colorado-based shortline operator OnmiTrax, announced Tuesday “it now appears that this transaction has fallen apart.”

The proposed sale of the railway and its port facilities “to this group may not be possible,” the company said, referring to the announcement in late May of a deal in principle with an investors’ group including Toronto investment firm Fairfax Financial Holdings, Regina pulse crop processor AGT Food and Ingredients and Missinippi Rail Partners.

The Missinippi group is a joint operation of Missinippi Rail Limited Partnership and OneNorth, a pair of groups representing northern communities in Manitoba and Nunavut. CBC on Tuesday quoted a statement from OneNorth saying it “remain(s) at the table and we fully support the efforts to conclude a reasonable deal.”

HBR didn’t say in its statement Tuesday why the deal has derailed, nor did it disclose any financial terms of the proposed deal.

The company said Tuesday it “will continue to pursue any and all opportunities to sell the (railway) and related assets, and we will look to do so as expeditiously as possible.”

The rail line, which runs from the northwestern Manitoba communities of The Pas and Flin Flon northeast through Thompson to the Port of Churchill on Hudson Bay, hasn’t operated since May 2017, following flooding and washouts along the stretch between Amery (about 45 km northeast of Gillam) and Churchill.

HBR declared force majeure and an indefinite suspension of operations on the line on June 9 last year.

The company said the track bed was washed away in 19 spots, five bridges were “visibly damaged” and another 30 bridges and 600 culverts would need to be further assessed. It later said repairs would cost as much as US$60 million and it wasn’t prepared to pay without government assistance.

The Canadian Transportation Agency (CTA) last month granted a request filed by an unnamed representative of Manitoba’s provincial opposition New Democrats and ordered HBR to get repair work underway by Tuesday (July 3) at the latest.

‘Repair process’

HBR — which said June 18 it plans to appeal the CTA ruling — added Tuesday it “initiated the repair process last week by issuing an RFP (request for proposals) through our engineering firm AECOM.”

However, the company said, “we want to make clear that this development may jeopardize the opening of the rail line this season. As we have previously stated, we are not in a position to fund the entirety of the repairs to the HBR in the absence of a sale agreement.”

While HBR on Tuesday thanked Fairfax Financial and Grand Chief Arlen Dumas of the Assembly of Manitoba Chiefs for their “good faith efforts to get a deal done,” it also said it wasn’t able “to find common ground on certain key issues.”

HBR described the talks’ outcome as “unexpected and very unfortunate” and put out apologies to northern communities and other stakeholders who depend on the northern line.

The federal government has said its 2008 agreement with OmniTrax calls for federal financial support to the railway, for which OmniTrax in return was to maintain and operate rail service through to Churchill until 2029. OmniTrax “has not met its obligations,” Winnipeg MP and federal natural resources minister Jim Carr said last October.

OmniTrax had bought the government-owned port and Canadian National Railway’s (CN) rail line from The Pas to Churchill in 1997. The rail line, completed in 1929, and the port facility, built by 1931, were set up to serve northern communities and provide an alternate shipping route into and out of Western and central Canada.

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

But the port’s grain handle declined in the five years after the deregulation of its main customer, the Canadian Wheat Board. OmniTrax shut down the port facility and laid off its staff before the 2016 grain shipping season.

The port’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. — AGCanada.com Network

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The CTA — the quasi-judicial tribunal and regulator for the Canadian transport sector — on Wednesday granted a request filed by an unnamed representative of Manitoba’s provincial opposition New Democrats to order OmniTrax Canada’s Hudson Bay Railway Co. (HBR) to begin repairs on the line.

The rail line, which runs from the northwestern Manitoba communities of The Pas and Flin Flon northeast through Thompson to the Port of Churchill on Hudson Bay, hasn’t operated since May 2017, following flooding and washouts along the stretch between Amery (about 45 km northeast of Gillam) and Churchill.

OmniTrax declared force majeure and an indefinite suspension of operations on the line on June 9.

The application from the Manitoba NDP caucus alleged HBR is in violation of its level-of-service obligations and asked the CTA to order the company to compensate residents along the line for job losses and rising costs of goods, and to either repair the line or undertake the same transfer/discontinuance process other railways are required to follow.

The CTA found HBR has been in breach of its obligations since November 2017 and must “initiate repair of the rail line by July 3, 2018 and resume its operation as expeditiously as possible.”

HBR also must file progress reports on the line’s repair once a month starting Aug. 1 “until operation of the rail line has resumed.”

“This is the first order forcing HBR and OmniTrax to repair the line that any level of government has received,” provincial NDP leader Wab Kinew said in a release Friday.

The shutdown of the line and port “has caused severe and ongoing economic losses to the town, including significant job losses,” the party said in its release. “Families have been struggling to afford the rising costs of food, household items and building materials.”

In its ruling, the CTA noted the NDP representative’s argument that even if flooding was found to be a “force majeure” event — in which unforeseeable circumstances prevent a party from meeting its agreed-upon obligations — it would only entitle HBR to claim a “reasonable pause” in operations, not to discontinue service altogether.

The NDP representative said OmniTrax in July last year claimed the damage could be repaired by the end of October that year for between $20 million and $60 million. However, the party rep was quoted as saying in the ruling, “a more fulsome investigation” might have found another cost estimate to cover the “immediate” repairs needed.

The CTA, citing an “undisputed” report by AECOM on the condition of the line, found “immediate” repairs include 21 track washouts, a culvert washout, two bridges with washout damage, two with “other” damage and one with heaving, plus three “unstable areas.”

Other “immediate but non-essential” repairs, the CTA said, include 33 culvert sites to be replaced or repaired and 11 with washout damage, 46 wooden box-type culverts to be replaced, eight bridges in need of repair or “further investigation” and three “unstable areas.”

However, the agency said, HBR claims it “cannot be compelled to bankrupt itself in order to provide reasonable service” and its service obligations “must be tempered by economic considerations.”

HBR cited precedents including a 2017 CTA case, brought by Univar Canada against Canadian Pacific Railway (CP), over the railway’s level-of-service obligations following a fire damaging a rail bridge leading to Univar’s Richmond, B.C. plant.

In the Univar case, the agency said it accepted that a force majeure event could make it impossible for a railway to provide service for “a period of time it termed a reasonable pause.”

However, the agency added, it “specifically rejected the notion that a railway company can be permanently relieved of its service obligations without following the transfer and discontinuance process.”

Any rail company that doesn’t avail itself of the transfer and discontinuance process, the CTA said, “has ongoing obligations… including service obligations.” HBR thus is “not permanently relieved from its level of service obligations” as they relate to the damaged line.

The CTA, referring again to the AECOM report, “which HBR itself commissioned,” found the Hudson Bay line could have been returned to operations for the “safe passage of light loaded trains” in November last year, thus the period of “reasonable pause” runs only until then.

The agency said it doesn’t have authority to order HBR to compensate other affected parties for expenses they incurred after the line was shut down.

It temporarily had such authority, it noted, when the Fair Rail for Grain Farmers Act was in effect from May 2014 until August 2016, and it has such authority again after the passage of the Transportation Modernization Act into law on May 23 this year.

An order for HBR to repair the line, however, is “clearly warranted in the circumstances of an ongoing service breach.”

The federal government on May 30 announced a deal in principle for the sale of the Hudson Bay line and Churchill port facilities to a buying group including Toronto investment firm Fairfax Financial Holdings; Regina pulse crop processor AGT Food and Ingredients; and Missinippi Rail Partners, a joint operation of Missinippi Rail Limited Partnership and OneNorth, representing northern communities in Manitoba and Nunavut. That deal has yet to be finalized.

Denver-based OmniTrax has owned the port and rail line since 1997. The rail line, completed in 1929, and the port facility, built by 1931, were set up to serve northern communities and provide an alternate shipping route into and out of Western and central Canada.

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

But the port’s grain handle declined following the deregulation of its main customer, the Canadian Wheat Board. OmniTrax shut down the port facility and laid off its staff before the 2016 grain shipping season.

The port’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. — AGCanada.com Network

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Natural Resources Minister Jim Carr, the MP for the Manitoba riding of Winnipeg South Centre, said in a statement Friday that U.S. rail operator OmniTrax is “responsible for restoring service to the affected communities” along the rail line to Churchill, Man. and “has not met its obligations.”

Transport Canada has served OmniTrax a notice of default of its agreement with the federal government, demanding that the U.S. company “complete all railway repairs and resume rail service within 30 days.”

Rail service to Churchill has been offline since May 23 when, according to OmniTrax, high water made the track “impassable.”

Severe flooding and washout conditions led OmniTrax’s Canadian arm to indefinitely suspend service on the Hudson Bay Railway from Amery, northeast of Gillam, Man., to Churchill starting in June. The line was not expected to resume operations before the winter season, the company said.

OmniTrax at the time said the track bed was washed away in 19 locations, five bridges were “visibly damaged” and another 30 bridges and 600 culverts would need to be further assessed.

The company later said repairs would cost as much as US$60 million and it wasn’t prepared to pay without government assistance.

The government last month said it was “deeply concerned” OmniTrax hadn’t yet started repairs on the line, and was instead 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.”

OmniTrax since 1997 has owned the government-owned port facility at Churchill and the former Canadian National Railway (CN) rail line leading to it from The Pas, Man.

The federal government last month reiterated 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.

Carr on Friday announced a “significant breakthrough towards an agreement between Missinippi Rail and One North to create a unified group as a potential buyer” for the rail line. The two First Nations consortia had stepped forward separately earlier this year as potential buyers.

The government’s appointed chief negotiator, lawyer Wayne Wouters, is expected to continue to facilitate discussions between all parties, including with the new partnership group, Carr said.

The port and rail line, built in the 1930s, have 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 the Port of Churchill instead of Thunder Bay is believed to shave up to three days off voyages to some ports in Western Europe.

The port’s grain handle, however, has declined in the five years since the deregulation of its main customer, the Canadian Wheat Board. OmniTrax shut down the port’s operations and laid off its staff before the 2016 grain shipping season.

The port’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. — AGCanada.com Network

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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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The Canadian arm of U.S. shortline firm OmniTrax confirmed Friday it has a letter of intent in hand from a group of First Nations in northern Manitoba, seeking to buy the company’s Manitoba assets.

OmniTrax Canada said last month its Churchill, Man. port and Hudson Bay Railway will need more government support to keep operating or, failing that, another owner or operator should be found.

The letter of intent triggers a 45-day due diligence period in which the investor group and company “will work together to ensure that a purchase becomes a reality,” the company said Friday.

The Manitoba and federal governments “will be approached to participate” in the process and “support the purchaser” in the deal, the company said.

“Having visited many communities along the rail line, it became clear to me that the rail line served as a utility for these remote communities and that for the line and the assets to truly succeed, First Nation participation in ownership and management was essential,” OmniTrax Canada president Merv Tweed said in Friday’s release.

The company on Friday didn’t identify any of the members of the proposed investor group, saying “further specifics of the group” and of the proposed deal would be available in the New Year.

A representative from Manitoba Keewatinowi Okimakanak (MKO), the body representing the province’s northern First Nations, was not immediately available Friday afternoon.

OmniTrax, owned by Denver-based investment firm The Broe Group, said it has agreed to work with the investor group for “a number of years, ensuring a smooth transition and detailed knowledge transfer.”

The company said this deal “will add to the already substantial economic development of the participating northern Manitoban First Nations, as well as maintain vital interconnectivity for all of the communities currently being serviced along the line.”

A deal would also mean “a further boost to the enhancement of the railway and port as a major transportation infrastructure for the northern region of Canada, enabling increased regional, continental and global trade opportunities.”

OmniTrax bought the government-owned port and Canadian National Railway’s (CN) rail line in 1997 for $50 million. The federal and Manitoba governments put up a like sum to help fund improvements for both assets.

The port and rail line, built in the 1930s, were meant to serve northern communities and provide an alternate shipping route into and out of Western and central Canada. Starting at The Pas and Flin Flon in western Manitoba, OmniTrax’s track runs over 1,000 km northeast via Thompson, Wabowden and Gillam, Man. to Churchill.

The company has said vessels can shave up to three days off voyages to some ports in Western Europe, if sailing from Churchill as opposed to Thunder Bay.

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 company’s Hudson Bay Railway, much of which is built on permafrost, less stable.

The company’s port in the past five years has exported an average of 554,548 tonnes of grain per year, but shipments in 2015 dropped to just 186,000 tonnes.

Churchill’s exports were expected to slip after its main customer, the Canadian Wheat Board, lost its single marketing desk for Prairie wheat and barley in 2012.

The federal government that year budgeted for up to $25 million to provide exporters using Churchill with a $9 a tonne subsidy to use Churchill. That subsidy program is set to expire at the end of July 2017.

On top of the port’s grain traffic, OmniTrax has previously said its studies show the rail line to be worth over $40 million per year in economic value to Canada’s North. The port can also handle general and breakbulk cargo, goods such as building supplies and machinery, liquid bulk goods such as fuels, and containers.

“We’ve spoken to both levels of government and suggested to them that the railway truly is a utility into the North and should be treated that way,” Tweed said in an interview with 98.5 FM The Rock in Yorkton, Sask. last month. — AGCanada.com Network

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Churchill has previously relied on the Canadian Wheat Board as its primary supplier of grain, but in 2012 the government deregulated the CWB’s single marketing desk for wheat and barley.

With the CWB now privatized and morphed into G3 Canada Ltd., Churchill has instead been receiving $25 million in government subsidies over a five-year period ending in 2017.

Merv Tweed, president of the port’s operator OmniTrax Canada, said he is appealing to different levels of government to continue the funding.

“They basically said we’ll think about it.”

OmniTrax has owned the port since 1997 — and that’s why the government is reluctant to continue funding, Tweed said, adding the company will make changes in order to continue funding.

“It’s like we have a sore arm, and they just want to fix the sore arm instead of the body that goes with it. We just feel that we’re important enough to the north.”

The port, he said, could open its books to the public if a partnership were to take place.

Another idea going forward, he added, may be to partner with First Nation governments.

The port employs mechanics, carpenters, millwrights and engineers, and if the port works with band councillors, the port would be able to hire more people from those communities, he said.

For now, the port is diversifying its traffic — starting with lentils.

The port opted to ship pulses as opposed to other commodities, because they are similar in nature to the grains Churchill already handles, Tweed said.

“I think, to diversify into much else, all we’re going to do is sacrifice one for the other,” he said.

Tweed said this year the port will move 75,000 tonnes of lentils grown in northern Saskatchewan.

Grain is moved from the port’s Prairie catchment area to Churchill over OmniTrax’s Hudson Bay Railway, running northeast from The Pas, Man.

Running a rail line in Canada’s north is costly, and much of that repair cost isn’t due to the cold, but rather to warm weather. A large stretch of the track runs over tundra, which softens as it warms.

“It’s a huge expense and it’s a continuous expense, even now,” Tweed said, noting the port’s budget runs up to $5 million.

“And I always say we’re one grain accident away from $10 million. It can add up very quickly.”

This year the port is working with four different shippers. The first load set to leave the port will be 36,000 tonnes of red spring wheat for Richardson International, bound to Africa.

The port has a grain handling budget of 500,000 tonnes per year, but Tweed said it may not meet that goal in 2015-16, though it will likely exceed 400,000.

— Jade Markus writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting. Transportation to and from the Port of Churchill for this article was provided by Hudson Bay Port Company.

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Merv Tweed, president of port and railway operator OmniTrax Canada, said the company expects the first grain vessel will go out sometime in late July.

The Hudson Bay port normally starts operations on July 15, and runs for 14 weeks until around the end of October.

“We’ve made a plan this year to start later, which helps lower the cost of maintenance on the track during June, which is usually the worst month of frost coming out of the ground,” Tweed said.

“By starting a little bit later we think we can certainly reduce the overhead and the cost of that.”

However, Tweed said, they’re still budgeting for a 500,000-tonne grain handling season — lower than last year’s shipments of 540,000, but about an average of what they’ve moved in recent years.

Last year’s late harvest in northern Saskatchewan and Manitoba also had an impact this year’s season, he said.

“Grain is not moving the numbers it has in the past, simply because the volumes aren’t there. I think people are waiting for a better price in the fall.”

The port traditionally ships wheat and canola, and in the past relied on the Canadian Wheat Board (now CWB) as its main customer. However, the company started diversifying, and now Tweed said they haven’t dealt with CWB in a year.

Employees are now at work preparing the port, he said. “Our season will open. People that are at the port right now are doing the upgrades that are necessary for the season.”

— Jade Markus writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

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