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Churchill ‘not going to make it’ after Omnitrax derails negotiations

OTTAWA — On a day that many Churchill residents had hoped would bring good news, Omnitrax suddenly announced that negotiations to transfer the Hudson Bay Railway and the Port of Churchill to a consortium with Manitoba ties have fallen apart.

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Hey there, time traveller!
This article was published 03/07/2018 (1670 days ago), so information in it may no longer be current.

OTTAWA — On a day that many Churchill residents had hoped would bring good news, Omnitrax suddenly announced that negotiations to transfer the Hudson Bay Railway and the Port of Churchill to a consortium with Manitoba ties have fallen apart.

Churchill residents were eagerly anticipating positive news Tuesday because of the visit of federal Natural Resources Minister Jim Carr and other prominent figures for an event focusing on the northern town’s future in Arctic research.

Tuesday was also the day the Canadian Transportation Agency ordered Omnitrax’s subsidiary, the Hudson Bay Railway Co., to start repairing the rail line to the town. The tracks from north of Gillam to Churchill washed out May 27, 2017, and the town has had to cope without its land link. The railway has said it can’t afford to repair the tracks. It plans to appeal the agency’s ruling.

(John Woods / The Canadian Press) A "no trespassing" sign at the closed Port of Churchill is seen on Monday.

“Despite our best efforts to find common ground on certain key issues, it now appears that this transaction has fallen apart. This outcome is unexpected and very unfortunate. We offer our apologies to all those who depend on the line,” Denver-based Omnitrax wrote in a statement Tuesday.

That was cold comfort to Rhoda de Meulles, who owns the local hardware store with her husband and can’t afford to keep flying in supplies.

“We are not going to make it,” she said.

“This town can’t do it,” Dale de Meulles added.

Repair tender won’t be made public: Omnitrax

Omnitrax will not be opening up its railway-repair tendering process to the public, the Free Press has learned.

In response to a regulatory ruling last month, Omnitrax said it would be putting up a request for proposals (RFP), asking construction firms to help repair the line with the help of Aecom engineering.

Omnitrax will not be opening up its railway-repair tendering process to the public, the Free Press has learned.

In response to a regulatory ruling last month, Omnitrax said it would be putting up a request for proposals (RFP), asking construction firms to help repair the line with the help of Aecom engineering.

The document, used to solicit tenders, would reveal an updated cost estimate and timeline for the repairs. It might also reveal new information on the state of the railway, which Aecom had last assessed before this winter’s freeze-up.

On Tuesday, Omnitrax clarified to the Free Press that Aecom decided “to provide the RFP to select rail contractors directly on a confidential basis.” The RFP was issued last week, but will not be posted on the Merx contracting website, unlike most construction jobs.

— Dylan Robertson

The statement arrived in the middle of programming aboard the Coast Guard’s Amundsen icebreaker, featuring multiple federal officials and Sen. Patricia Bovey. NDP MP Niki Ashton and Liberal MLA Judy Klassen were also in town to hear from locals about the hardship they’ve endured since all goods sent to Churchill have had to be flown in at expensive prices.

Tuesday’s statement derailed plans for a day that was supposed to give hope to residents and focus on the area’s long-term viability. It prompted officials to disembark from the Amundsen and brainstorm about responding to the media.

Omnitrax said it would look for buyers other than the ones the federal government lined up for talks that started last September: the consortium of OneNorth, Missinippi Rail and the Toronto firm Fairfax, which partially owns the Saskatchewan railways held by AGT Foods.

(John Woods / The Canadian Press) Churchill Mayor Mike Spence.

Sources familiar with the talks say the negotiations continued throughout the weekend, and that Omnitrax has been reluctant to either hold or pay for any of its liabilities in northern Manitoba. It’s unclear whether the company had been seeking a payment or intended to hold on to some profitable assets or wanted to walk away without paying its debts.

Omnitrax would not confirm or deny that claim. A statement from Carr’s office cited the need for “a reasonable deal” and said Ottawa can provide financial backing in the ongoing talks.

“We encourage all parties to achieve consensus on a reasonable deal in the best interests of the people of Manitoba,” wrote spokesman Mackenzie Radan, promising “a way forward that will deliver a solution.”

The co-chairs of the OneNorth bid also said they’re sticking with the talks.

(John Woods / The Canadian Press) Churchill's closed Via Rail station.

“Our buying group is united. We remain at the table and we fully support the efforts to conclude a reasonable deal,” wrote Churchill Mayor Michael Spence and Opaskwayak Cree Nation Chief Christian Sinclair.

Others involved in the talks expressed exasperation in the federal Liberals’ handling of the deal, expecting shovels to be in the ground by this point.

Omnitrax wrote Tuesday that the talks falling apart “may jeopardize the opening of the rail line this season.” Ottawa had pledged on May 30 to restore rail service “before winter 2018.”

— with files from The Canadian Press

dylan.robertson@freepress.mb.ca

The Canadian Transportation Agency ordered Denver-based railway owner Omnitrax’s subsidiary to start repairs to the line by July 3. (Omnitrax photo)
BORIS MINKEVICH / WINNIPEG FREE PRESS FILES Omnitrax Canada president Merv Tweed has been difficult to find lately.
Via Rail cars wait to be loaded aboard a ship at the Port of Churchill in October, 2017
Justin Tang / The Canadian Press Minister of Natural Resources Jim Carr during Question Period in the House of Commons on Parliament Hill.

Timeline: Ottawa’s twisting relations with Omnitrax

May 23, 2017

Heavy snowfall followed by a rapid melt washes out the Hudson Bay Railway at Amery, just north of Gillam. For the first time since 1929, Churchill can no longer be accessed by rail and must rely on summer sealifts and year-round flights, which cost $1,300 round-trip from Winnipeg.

June 1, 2017

Omnitrax amalgamates its northern Manitoba assets under its subsidiary, the Hudson Bay Railway Company

June 9, 2017

Omnitrax declares a force majeure, an unexpected incident that can remove legal liability, and suspends service indefinitely along the line.

July 18, 2017

Omnitrax holds a press conference in Winnipeg, revealing that repairing the line would cost $40 to $60 million, which company executive Peter Touesnard says “is not economically viable.” He cites the reduction in business since the closure of the Wheat Board monopoly and the high cost of maintenance on thawing permafrost.

August 21, 2017

Omnitrax presents Transport Canada with an Aecom engineering report that pegs the cost of repairs at $43.5 million, which must start “by early September” to restore service that year.

August 28, 2017

The Prime Minister’s Office successfully gets two competing bids to join forces in their quest to take over Churchill’s railway and port.

Missinippi Rail — which was led by Grand Chief Arlen Dumas prior to his election as head of the Assembly of Manitoba Chiefs — had already signed a deal with Omnitrax in January 2017, but fell through because it hinged on federal funding. OneNorth — which represents towns and Indigenous communities along the railway, as well as Thompson, The Pas and Nunavut’s Kivalliq region — was a newer bid co-launched by Churchill Mayor Mike Spence and Opaskwayak Cree Nation Chief Christian Sinclair.

September 8, 2017

Ottawa announces it has appointed Wayne Wouters, former head of the public service under the previous Conservative government, to lead negotiations between Omnitrax and the consortium.

October 6, 2017

Omnitrax releases another Aecom engineering report detailing an interim fix that would keep minimal service along the railway, to transport fuel and necessities to the town, at a cost of $5 to $10 million. Transport Minister Marc Garneau’s office dismisses the report as “last-minute suggestion.”

A local entrepreneur gets federal funding to launch an ice trail that winter, which brings up some heavy goods but encounters difficulty along the path.

October 17, 2017

Via Rail places its two locomotives and five rail cars on a boat, to prevent its stranded train from rusting. The same boat delivered propane to help locals survive the winter, at a $6-million cost to the province.

October 27, 2017

The Canadian Transportation Agency starts investigating whether Omnitrax had violated federal law by not properly discontinuing service along the line. The regulatory probe came after transportation lawyers told the Free Press the company was likely breaching federal laws, prompting the provincial NDP to file a formal application.

November 14, 2017

Ottawa files a $18.8-million lawsuit in a Winnipeg court over a 2008 funding agreement, saying Omnitrax has breached contractual duties to keep the line operational until 2029. Within hours, Omnitrax files a notice of intent to seek damages under the North American Free Trade Agreement (NAFTA), claiming Ottawa had sabotaged the railway’s economic viability in an attempt to nationalize it.

The federal lawsuit has since stalled for months, and government sources have said it was used as a point of leverage in the takeover talks. The province has not filed its own suit for the $20 million it gave Omnitrax through a similar 2008 agreement.

November 16, 2017

Toronto billion-dollar investment firm Fairfax Financial Holdings announces its interest in the railway, hinting at a financial partnership that would involve its partner company AGT Foods. The Saskatchewan lentil company operates its own short-rail lines in the province, and sources say Ottawa intends to use AGT equipment to start repairs along the line.

March 6, 2018

A Winnipeg judge strikes Omnitrax from Ottawa’s $18.8-million lawsuit, siding with the firm’s contention that it’s a totally separate company from Hudson Bay Railway Company. With Ottawa’s consent, the lawsuit is now only against HBRC, which has almost no money.

May 3, 2018

A Calgary-based firm called iChurchill reveals its existence through a press release declaring it had reached an agreement to take over the railway and port, with an intent to ship goods — possibly oil — through Hudson’s Bay. Within three weeks, iChurchill suspends operations, saying Ottawa has picked favourites and isn’t willing to negotiate with anyone other than the consortium. The federal government has said it will only support groups with local buy-in, something iChurchill had never publicly demonstrated.

That month, the Chinese firm Herun Group also announces an agreement with Omnitrax, raising suspicions the company is soliciting bids to use as leverage in the existing takeover talks, a claim Omnitrax denies.

May 30, 2018

Ottawa announces it has an agreement-in-principle with Omnitrax and Fairfax to get the assets transferred. The federal government says in a press release that a “solution is imminent,” and the Liberals give themselves a deadline, committing “to re-establishing rail service before winter 2018.”

May 31, 2018

Natural Resources Minister Jim Carr, the lead on the file and sole Manitoban in Cabinet, tells the Free Press that a full deal to hand over the assets is coming soon. “I would say that that is in days, not weeks,” he says.

June 13, 2018

The CTA rules that Omnitrax’s subsidiary, the Hudson Bay Railway Company, must start repairs along the line by July 3. It rejects the company’s argument that the two are unrelated firms, but also disregards the NDP’s demand that the firm compensate locals for higher living costs.

That day, the company said it intended to appeal the decision in Federal Court — which it can do within a month — but also that it would start repairs if the transfer had not been completed by July 3.

July 3, 2018

Omnitrax announces the talks between Wouters and the company have collapsed, releasing a statement over the lunch hour while Carr and other officials are visiting Churchill to talk about the town’s viability in an Arctic strategy.

History

Updated on Wednesday, July 4, 2018 2:50 PM CDT: clarifies info about iChurchill

Updated on Thursday, July 5, 2018 12:14 PM CDT: includes with files from The Canadian Press

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