Omnitrax argues it has right to delay fixing Churchill line until railway has cash

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This article was published 15/07/2018 (2675 days ago), so information in it may no longer be current.

OTTAWA — Omnitrax says it has a right to retain its washed-out railway to Churchill without fixing it until its subsidiary has enough cash, in its appeal of last month’s regulatory order to immediately start repairs to the Hudson Bay Railway.

“The order demands that HBR get blood from a stone,” the company’s lawyer argued in filings to the Federal Court of Appeal, submitted on July 6.

The filings also claim Ottawa had asked Omnitrax to study the potential for an interim fix to the railway that would have allowed essential supplies to reach the town through the winter — an idea the Liberals later shot down when it was made public.

Last month, the Canadian Transportation Agency ruled that Omnitrax’s subsidiary, the Hudson Bay Railway, violated federal law by ceasing service along the railway to Churchill after it washed out in May 2017.

The probe came about when the provincial NDP filed a formal complaint, after transportation lawyers told the Free Press that Omnitrax had likely violated federal law.

The regulator ruled last month that Omnitrax ought to have either repaired the line before the winter freeze, or started a “discontinuance” process. The latter involves putting the line up for sale and notifying the government, which can then compel a lower purchase price, or effectively take over the line if no one buys it at a market rate within a year.

“This is a false dichotomy,” Omnitrax argued in its request for an appeal, calling the ruling an “oversimplification” of either repairing the line or discontinuing it.

“The agency failed to consider the third possibility, that the railway company may be relieved of its duty to provide service on the line for so long as it lacks the financial capacity to repair the line,” the agency wrote, “without a fixed or predetermined deadline” for repairs.

NDP Leader Wab Kinew said that claim doesn’t hold water. “The order from the CTA was very direct,” he said. “They didn’t say ‘fix this if you have enough money.’ ”

Omnitrax argues in its filings that the “enormous repair costs” make repairs impossible. The regulator acknowledged that the company’s confidential financial records show its HBR subsidiary could not afford $43.5 million in repairs, while the company says it has tried in vain to secure government and investor funding.

Omnitrax has resisted having its much more lucrative parent company held liable for the financial liabilities of HBR.

But Kinew said the company is being held to account for not following through for northern Manitoba: “I would just say we flip it on its head, and say: ‘What about your responsibility to the people of Churchill?’ … that should be superseding any sort of challenges the company feels it faces.”

Omnitrax also alleged Ottawa had been behind the proposal to temporarily restore limited service along the line in order to bring up emergency provisions — an idea the federal Liberals dismissed when it was made public.

Initially, the company had commissioned the engineering firm Aecom to tally the cost and method of repairing the line, which it pegged at $43.5 million in an August 18, 2017 report, that would allow “light-loaded trains” to arrive that winter, followed by final repairs in the spring that would allow freight trains to service the line.

That October, Aecom completed a second report, outlining a 30-day temporary fix that would “restore only restricted service” to allow work trains to bring up “emergency supplies/provisions” through the winter, adding $5 million to $10 million to the original cost.

The company claims it only commissioned that second report because Ottawa asked for it when Omnitrax came looking for federal dollars: “At the government’s request, AECOM prepared yet another plan, one which would permit a temporary fix,” reads the filing.

When Omnitrax made that plan public in October, the office of Transport Minister Marc Garneau dismissed that idea as a “last-minute suggestion” from Omnitrax, saying the company had chosen “to deflect responsibility for fixing the line to everyone else but themselves.”

On Sunday, Garneau’s spokeswoman suggested it wasn’t Ottawa who asked for the interim fix.

“On October 2, (2017) on a call with federal officials, Omnitrax indicated it was developing a plan for a quick fix or partial repair of the railway to restore a very basic rail service, before the winter,” wrote Delphine Denis, adding the company presented Transport Canada with that plan four days later.

“Their plan required 38 days to mobilize crews and complete construction, so there was not sufficient time before the winter to conduct the temporary repairs,” Denis wrote.

The federal and provincial governments have spent more than $5 million on propane shipments, food subsidies and removing a rusting Via Rail train, as a result of the railway not being repaired.

Last month’s transportation agency ruling said Omnitrax ought to have started repairs in November 2017, because that was the temporary fix outlined in the second Aecom report and thus a “reasonable” amount of time for the company to plan repairs and find ways to fund them.

Omnitrax rejected that calculus. The company cited a 1959 Supreme Court decision, which said that determining the “reasonable” enforcement of railway obligations must include financial viability:

“They cannot be compelled to bankrupt themselves by doing more than what they have embraced within their public profession, a reasonable service,” reads the so-called Patchett ruling.

Omnitrax also complained that the ruling was not precise and thus isn’t clear, because its order to start repairs July 3 didn’t include a deadline for those repairs to conclude. It further lamented the CTA asked the company to report on progress of its repairs on a monthly basis: “Given the vagueness and sweep of the order, this leaves its enforcement against HBR completely at the agency’s whim.”

It’s unknown when the Federal Court of Appeal will decide whether to hear the appeal. Normally the plaintiffs — the CTA and the provincial NDP — would have to submit responses before a judge considers whether to hear Omnitrax’s appeal.

Kinew said Churchill residents have been dealing with conflicting information from Omnitrax, such as when it told the regulator it doesn’t actually own the railway, and its July 3 announcement that talks aimed at transferring the railway and port into local hands had broken down, only to resume a week later.

“One day they’re hot, one day they’re cold.”

He also criticized the Pallister government for not intervening in the case. There are no shovels in the ground, and the province recently decided to order a third shipment of propane for Churchill residents, which will arrive before the winter freeze-up — suggesting it’s a contingency plan in case the railway does not get repaired this year.

“It seems like the province has skipped right over trying to get the rail line fixed, and gone straight to Plan B, which is helping the people of Churchill prepare for another winter without a rail connection.”

dylan.robertson@freepress.mb.ca