Pssst! Want to buy a port? It comes with your very own railroad.
Take your time. Think about it. We don’t expect a bidding war.
In the wake of its smallest shipping season in recent history, there are now reports that Colorado-based OmniTrax wants to sell the Port of Churchill and the rail line that supplies it — unless governments step up with more support.
Some would call it posturing. Others would call it reality.
Shipping out of the northern port got off to a late start in 2015 and when the last vessel sailed, it had handled 186,000 tonnes, a precipitous drop from its 10-year annual average of 533,200 tonnes.
Many would argue the writing was on the wall as of Aug. 1, 2012, when the port’s biggest user, the Canadian Wheat Board, was privatized. Perhaps we need to look further back in time to 1997 when the federal government privatized the port and CN divested itself of the rail line to OmniTrax. At the time, governments were generally of the view that the private sector could run things more efficiently.
We suppose it was worth a try. Even though the port was never a huge moneymaker, it had a steady customer and there was potential for the new owners to drum up more traffic.
The wheat board didn’t artificially prop up the port, although some would argue differently. The board exported out of Churchill because it made farmers more money due to lower shipping and handling costs.
Shipping grain through Churchill costs about $30 per tonne less than through the St. Lawrence. And the board didn’t have investments in port terminals elsewhere, which is the conundrum facing grain handlers today.
It might cost less to send volumes northward, but every tonne shipped through that terminal is a tonne of handle lost at facilities they own on the West Coast and in the East. At the end of the day, a grain company’s primary job isn’t necessarily to deliver the best value to the farmer, it’s to maximize returns to its owners.
The federal government’s promise of a $9-per-tonne subsidy to grain companies using the northern route is due to end in 2017, after which there is little incentive for grain companies to view it as anything more than a poorly positioned competitor.
As for the ‘other’ traffic, a plan to export sweet crude through Churchill ran into major opposition from environmental groups and the Manitoba government over the potential for derailment and spills. Different imports have been tried — inbound fertilizer, outbound specialty crops — but nothing has really happened to change the limp-along outlook for the port.
There are many good reasons to support the northern port, but although it can potentially hold its own financially, it’s not a compelling investment on economics alone.
The route’s reliability may become even more volatile as climate change warms up the North. While it is believed the port’s shipping season could expand, it may make the rail line that is routinely compromised during the summer months even less stable.
As well, the export customer base has changed since the 1970s when the port’s handle peaked at 735,000 tonnes. Back then, Canada’s biggest customers were in Europe and the Soviet Union. The former Soviet Union is now a major competitor, not a buyer.
Churchill faces an uncertain future. It is time for the federal and provincial governments to decide just how valuable this port is to the nation — or perhaps the question is how valuable are our northern communities?
The reasons it was built in the 1930s, to facilitate exports of grains from Western Canada, importing industrial goods, northern resupply and strategic defence of Canada’s sovereignty in the North, all remain valid.
But are they still viable in the context of Canada’s other priorities in times of restraint? Despite all the investments made over time, at what point does humankind yield to the forces of nature?
And are there other means of achieving the same ends?
For example, in the face of a melting permafrost, are hydrogen or other gas-filled airships, which reportedly cost about one-third of the cost of airplanes, a better option for delivering freight to remote communities than relying on a rail line facing the constant threat of sinking into a melting permafrost?
Perhaps governments should buy back the line and take over its maintenance. It could be an experiment with open running rights. It could be a boon to producer car shippers, particularly those located within the line’s catchment area.
At the end of the day, it will be governments that determine the fate of this northern route, either because of a purposeful decision to reinvest or a de facto decision to pass.