First Nations interested in buying Churchill port and railway from OmniTrax Canada

A letter of intent has been accepted triggering a 45-day due diligence period in which both parties will work together to ensure that a purchase becomes a reality

The sooner the Port of Churchill and the rail line that serves it have a new owner the better, says Sinclair Harrison, president of the Hudson Bay Route Association (HBRA), an organization that supports and promotes the Hudson Bay Railway and Canada’s only deepwater ocean port.

“We’re heading into another year and so long as there’s no solution to this, it’s going to be difficult to get any marketing through the port next year,” Harrison said in an interview Dec. 18.

“You get into late April or May and if this (sale) hasn’t happened by then it’s going to be very difficult to convince shippers that’s the route to go.”

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OmniTrax Canada, which owns the port and railway, issued a news release Dec. 18 stating it had accepted a letter of intent from a group of northern Manitoba First Nations for the purchase of its Manitoba assets. The deadline to complete the deal is Feb. 1, 2016, but it could occur sooner, OmniTrax Canada president Merv Tweed told CBC Radio in an interview Dec. 18.

“It’s a group of communities along the line and others that I think always believed the railway was theirs and this now can become a reality based on current negotiations,” Tweed said.

Precedent

There’s precedent for such a transaction. OmniTrax sold its 185-mile line that runs from Sherritt Junction to Lynn Lake, Man., to a First Nations consortium called the Keewatin in 2006.

News broke last month that the port and line were for sale following a disappointing grain-shipping season. Churchill exported 186,000 tonnes of grain — well under the 10-year average of 554,548 tonnes. Tweed said the drop was an “anomaly.”

“If the grain shipments return into that 500,000-metric-ton level, both the rail and the port will do OK,” he said.

But if OmniTrax is so confident, why sell?

Tweed has repeatedly called the railway, which it bought with the port in 1997, a “utility.”

“And I think it should be operated that way and I think there’s a real interest among both levels of government to see that the railway continues to serve those communities,” he said.

The Manitoba and federal governments have publicly confirmed that the line and port are important and won’t be abandoned. The railway, some of which is built on permafrost making it difficult to maintain, is the only land link to many northern communities, including the Town of Churchill. And the port is the gateway to many communities farther north linked only by sea in summer and air the rest of the year.

“We understand that negotiations are underway that could see this strategic railway and the Port of Churchill maintained and enhanced through a made-in-Manitoba ownership model,” Steve Ashton, Manitoba’s minister of infrastructure and transportation said in an email Dec. 18. “While we are not involved in the negotiations we will continue to support this critical infrastructure that is vitally important to the economy of the North and a key part of the Arctic gateway.”

Little information

Tweed declined to name the First Nations interested in the purchase. He was also mum about the asking price and whether governments would have to assist in the purchase.

If the sale goes through, OmniTrax will work with the buyers “until the comfort level and knowledge transfer allow them to operate independently,” Tweed said.

The federal and Manitoba governments invested $68 million in the port and line when OmniTrax bought them 18 years ago. OmniTrax has invested nearly $100 million, Tweed said. According to studies, the line’s value to northern economy is in excess of $40 million annually.

Barry Prentice, a professor of supply chain management at the University of Manitoba, says governments should consider the transportation demand and allow the data to inform decisions. It might make more economic sense to rip up the railway to Churchill and build a road, Prentice said in an interview Dec. 2. However, he added if the line was removed, it would never be rebuilt, which could hurt future mining and Hydro development.

The HBRA is confident the line and port can be viable, Harrison said. With not much effort the port could export a million tonnes of grain annually, he said. With the port’s short shipping season due to ice, it make sense to operate the port around the clock, seven days a week.

“I think if there’s an aggressive owner that wants to turn a million tonnes the potential is there,” he said.

Churchill has the advantage over some other Canadian ports of being closer to Europe, Africa and many South American destinations. However, Prentice and others have said grain companies prefer to export through their own terminals and none own facilities in Churchill.

About the author

Reporter

Allan Dawson

Allan Dawson is a reporter with the Manitoba Co-operator based near Miami, Man. Covering agriculture since 1980, Dawson has spent most of his career with the Co-operator except for several years with Farmers’ Independent Weekly and before that a Morden-Winkler area radio station.

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