Port, Hudson Bay Railway should be in public hands

Hey there, time traveller!
This article was published 02/08/2016 (3388 days ago), so information in it may no longer be current.

It is becoming increasingly apparent that Omnitrax is seeking a buyout, and not a bailout.

It’s been little more than a week since the Denver-based company that owns the Hudson Bay Port Company and Hudson Bay Railway stunned northern Manitoba by shutting the former and curtailing freight traffic on the latter. Throughout most of that week, observers have been hard-pressed to figure out what Omnitrax wanted.

Omnitrax has made no public statement to explain its actions. The provincial and federal governments have gone silent, for the most part.

Last week, upset about the company’s actions, Manitoba Premier Brian Pallister went on a rant and ruled out any kind of taxpayer bailout. However, following a long weekend where concern over soon-to-be-high food prices spiked across the affected region, the province, too, went quiet. The federal government, meanwhile, continued to carpet bomb Manitoba with rhetoric and platitudes. 

Innovation, Science and Economic Development Minister Navdeep Bains, the lead federal minister on the file, declined an interview request and issued yet another statement via email saying he was “deeply disappointed by Omnitrax” and currently in “ongoing discussions with my cabinet colleagues, the province and local leaders” about what to do next.

And then, in the late morning Tuesday, a moment of clarity as Natural Resources Minister Jim Carr, the senior ranking Liberal MP from Manitoba, inadvertently brushed away some of the fog. 

At a news conference to confirm a $15-million federal contribution to the new Inuit Art Centre in Winnipeg, Carr said Omnitrax was “no longer interested” in its Manitoba operations. When pressed, Carr attempted to backpedal, suggesting it was just his interpretation of events. 

And perhaps that’s all it was. However, there is increasing evidence to suggest Omnitrax is seeking a buyout, not a bailout, and in that context Carr’s comments are telling. Moreover, it appears the company’s preferred partner in such a transaction is government.

A private-sector partner seems to be a non-starter. Closing the port and scaling back rail service have driven down the market value of Omnitrax’s assets. That leaves government as the only viable option.

Two big questions now come into focus: how much does Omnitrax want to go away and is anyone in government at either the federal or provincial level interested in purchasing these assets?

It is not clear Omnitrax has put a price tag on its port and railway. Even those involved in a possible sale to a consortium of First Nations claim no firm asking price was reached.

When Omnitrax does ultimately identify a price, you can bet it will have less to do with the actual market value and more with the political value — and that is enormous.

The railway, in particular, is a critical link between southern and northern Manitoba. Without it, the North would slowly and painfully recede further into economic and social isolation.

It is for those reasons most informed observers believe government will have to eventually come to the table. Given Omnitrax now holds most of the cards in any negotiation, it is going to be a frustrating and potentially expensive process.

However, even skeptics agree the railway and port should be re-nationalized. The hope a creative, innovative private owner could make the railway and port profitable has been revealed as a sham. After turning over the assets nearly 20 years ago, government has been forced to kick in tens of millions of additional dollars to maintain the rail line and port. It has paid millions more to fund task forces to study the economics of the port and market it to people all over the world. 

Omnitrax no doubt earned a profit on its Manitoba operations in the good years. In the bad years, or whenever major repairs or maintenance were needed, it stuck out its hand for taxpayer support. And none of that includes the subsidies paid to maintain passenger rail service to Churchill.

Via Rail, the federal Crown-owned passenger service, pays millions of dollars every year to transport people to Churchill from Winnipeg. To The Pas from Winnipeg, payment is made to Canadian National Railway; north of The Pas, the money goes to Omnitrax.

Via officials would not break down how much it pays to either CN nor Omnitrax. In 2015, Via spent more than $20 million in net costs to operate passenger service to Churchill from Winnipeg. On a subsidy per passenger basis, it is the most expensive regional rail service in the country.

What did taxpayers get for the 1997 “sale” of the railway and port to Omnitrax? Tens of millions of dollars in direct and indirect taxpayer subsidies to a private-sector company that eventually grew weary of doing business in Manitoba and is now willing to eviscerate its operations to press its case for a sale.

The port and railway should be publicly owned assets. Perhaps in the hands of an arm’s-length, not-for-profit authority of some sort, or a true public-private partnership.

Buying Omnitrax out of its Manitoba operations is going to be difficult and potentially expensive. In the long run, however, it’s a small price to pay to avoid having a private company hold a region of the province hostage.

dan.lett@freepress.mb.ca