The owners of the Port of Churchill and the rail line serving it say it’s up for sale unless governments agree to provide more support.
Merv Tweed, the president of OmniTrax Canada, a subsidiary of Denver-based rail company OmniTrax, did not return phone messages before press time Monday. But he said in an interview with a Saskatchewan radio reporter Nov. 26 that OmniTrax wants help — or it wants out.
“Obviously after a tough year in the grain industry we’ve looked at a lot things and come to the conclusion that wither the railway or the port needs more support, or perhaps another owner or operator could take it over and see what they could do,” Tweed told Jack Dawes on 98.5 FM The Rock, Yorkton, Sask.
“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 declined to discuss how much OmniTrax would be willing to sell the port for, or how much government support would be needed to keep it operating.
But he said his company has invested nearly $100 million in addition to government programs to develop the port and line since it took ownership in 1997. He said it has commissioned studies that found the line’s value to northern economy is in excess of $40 million annually.
“I think it’s really important for people to understand, this about service to communities that live along the line to the Port of Churchill and for them to continue to receive the services.”
Tweed said OmniTrax has spoken to both levels of government. It wants answers before the end of the year.
Sinclair Harrison, president of the Hudson Bay Route Association (HBRA), an organization of farmers and citizens that supports the port atwo other HBRA officials met with Tweed and OmniTrax North America CEO Kevin Shumba Nov. 17, Harrison said.
“We said ‘we heard rumours the port is for sale,’ and they said ‘yes, we can confirm that,’” Harrison said. “We asked them if that was public knowledge and they said that it was.”
“For us, as a support organization it leaves a lot of uncertainty for everybody, including the shippers.”
It also raises questions for communities served by the line that runs from The Pas to Churchill, Manitoba’s only ocean port. For many it’s their only land link.
The Manitoba government was informed, according to Harrison. Neither agriculture minister Ron Kostyshyn nor Premier Greg Selinger responded to an interview request, by press deadline.
Although over the previous five years Churchill has exported an average of 554,548 tonnes of grain, this year shipments dropped to just 186,000 tonnes.
Harrison said OmniTrax attributed the decline to farmers in the Churchill catchment area not delivering grain during late summer leading up to Churchill’s short, three-month-long shipping season, which runs between ice breakup and freeze up.
Not only is the shipping season short but the terminal only holds 140,000 tonnes of grain and it’s difficult to keep the rail line, much of built on permafrost, operating when the ground thaws.
While exporting grain through Churchill can save on ocean freight to Europe, west Africa and South America, grain companies prefer to export through their own terminals. They also want to segregate their grain, adding to logistical problems, Harrison said.
There were predictions Churchill exports would decline after the Canadian Wheat Board — the ports main and sometimes only grain customer — lost its marketing monopoly Aug. 1, 2012. To help with the transition the federal government allocated $25 million over five years to offer exporters a $9 a tonne subsidy to use Churchill.
The HBRA passed a resolution at its annual meeting in July asking Ottawa to extend the subsidy past July 31, 2017, but when it’s not being fully subscribed it’s hard to justify, Harrison said.
Global warming has already extended Churchill’s shipping season, which is expected lengthen more in coming years, but warmer weather also makes the railway less stable.
The railway is seen as important to developing the north’s natural resources and enforcing Canada’s sovereignty.
OmniTrax purchased the government-owned port and CN-owned line in 1997 for $50 million. At the same time the federal and Manitoba governments kicked in that much again to help fund improvements to both.
The Manitoba government also invested $6 million to help dredge the harbour to allow bigger ships to load. Since then governments have invested almost $80 million to support the line and port.
Harrison said he doesn’t know if the port and line are sold whether governments will get any of their money back.
OmniTrax had said it wanted to export one million tonnes of grain but peaked at 710,000 tonnes in 2002 — just short of the record of 735,000 in 1977.
OmniTrax has tried to diversity traffic, importing Russian fertilizer one year. It also proposed moving light sweet crude in 2013 but put that plan on hold in 2014 following opposition to it.
There was talk of exporting ore from Thompson to Newfoundland for smelting.
“They told us they haven’t made money for 10 years and if a potential buyer wants to see the books they can sign a non-disclosure and see the books,” Harrison said.
Churchill critics have argued the port is uneconomic, but Harrison disagrees.
“I think if it were marketed properly and the incentive is there it can work,” he said.
It might help if the port and line were owned by a grain company.
“When you own a terminal and you don’t have a collection system in the Prairies it certainly does complicate the issue,” Harrison said.
The port made sense for the wheat board to use because it didn’t own terminals and had the flexibility to move grain to Churchill during the winter when the rail line was more stable. Pooling allowed savings on rail and ocean freight to be shared by farmers.
The Canadian Northern Railway started to lay track from Winnipeg to Hudson Bay Junction in 1908, but declined to go north despite, federal government aid. With more government funds the next year, the railway headed to Nelson on Hudson Bay, but work ceased during World War I.
When construction resumed it was decided to go further north to Churchill where the water was deeper. The Hudson Bay line was completed in September 1929 at a cost of $45 million, but it wasn’t until 1931 that the grain terminal at Churchill began operating.