First Nations leaders proving adept at train transition

First Nations ownership and utility-like business model will be key ingredients of a successful transition

OmniTrax might be pulling out of northern Manitoba, but that doesn’t mean the railway is doomed.

Merv Tweed, OmniTrax Canada’s president, told the Hudson Bay Route Associations’ Mar. 23 annual meeting in Yorkton a consortium of First Nations communities is poised to take over the Hudson Bay Railway.

Facing tough questions from the crowd about the condition of the track, Tweed said there’s actually considerable cause for optimism.

In particular, Tweed singled out the Mathias Columb Cree Nation, under the leadership of Chief Arlen Dumas, as instrumental in spearheading the project. Working under strict mutually agreed-upon rules and a tight timeline, Dumas has delivered, Tweed said.

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“We set up a pretty stringent set of rules that we were both going to follow, and I’m pleased to say Chief Dumas hasn’t disappointed me and I would hope that he would say the same,” Tweed said.

Tweed noted that Dumas’s personal strength as a leader played an important role in garnering hard commitments from 12 other First Nations communities. They also bring experience in the northern rail business to the table, Tweed said, as part of the Keewatin Rail company, operating the line from The Pas to Puckatawagan.

When OmniTrax announced its intention to sell both the port and rail line in late 2015, Tweed was told to identify a number of potential scenarios, including local First Nations ownership, the option he ultimately recommended. In no small part that’s because the railway is so important to these communities, he said.

“What I’ve come to realize is that Hudson Bay Railway is a utility,” Tweed said. “It is a service to the North and it provides that service to many First Nations communities.”

Tweed said he hopes the new ownership will keep the service in place for those communities, and foster closer ties between them and the operation.

While there is a significant number of First Nations employees working the line now, Tweed said there’s still room for improvement, and that the local Aboriginal communities are the obvious source for employees for any business in the region.

Returns challenging

OmniTrax, a U.S. short line operator, had high hopes when it bought the track from CN in 1997, but the reality of running an operation through some of the most challenging terrain on earth proved daunting even to this experienced company.

Higher-than-expected maintenance costs meant scant returns for investors and ultimately led the company to announce in late 2015 it was seeking buyers for the line and the Port of Churchill with its northern grain terminal.

While Tweed insisted the issue wasn’t one of day-to-day profitability, he said melting permafrost and other challenges required significant ongoing investments.

“It’s not a money-losing proposition for our ownership or the new ownership,” he said. “The reality is there’s not enough return on investment to do the things that need to be done to improve it to a point where it can be even better.”

While government did occasionally put up critical maintenance funds, no politician likes to be seen giving money to private companies, said Tweed, a former MLA. With local ownership and an operation model that was more like a public utility, it might be easier to negotiate those investments, he said.

“We will work with this group to present the package to the federal government as to how they can sustain themselves going forward,” Tweed said. “They’re not in this to lose money, but they’re not necessarily in it to get the return on investment.”

Instead, the First Nations communities are more interested in keeping the line running, creating jobs, opportunities and a sense of future, Tweed said.

Port operation uncertain

While the rail line issue is close to being finalized, Tweed conceded there’s still a cloud of uncertainty over the fate of the Port of Churchill and the grain-handling facility there.

For now, OmniTrax will continue operating the port for the 2016 shipping season, which normally would begin in August. A federal subsidy of $9 per tonne remains in place for now, but Tweed reminded the audience that was money paid to the shipper, not the carrier, noting the only direct benefit it gave OmniTrax was a bit more interest when it came to finding a new operator for the facility.

The port handled just 184,600 tonnes last year, which Tweed said was due to less carry-over from the 2014 crop and a late harvest, but noted the company put in the time to work to make improvements like additional lighting and security fencing.

“We got a lot of other things done,” he said. “We weren’t sitting around waiting, we were actually doing things that improved the facility.”

Churchill’s 2016 target has been set at 500,000 tonnes or more, a level that has been exceeded in six of the last 10 years. Last year saw pulses moving through the port and Tweed is optimistic this trade could expand.

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