Despite government help, Hudson Bay Railway in dire need of cash

Hey there, time traveller!
This article was published 27/07/2016 (2427 days ago), so information in it may no longer be current.

The federal and provincial governments have poured more than $130 million into the Hudson Bay Railway and the Port of Churchill since Omnitrax Canada took over the assets in 1997 but industry officials believe it remains woefully undercapitalized.

The 877-kilometre rail line between The Pas and Churchill runs through several communities that rely on rail service as their only all-season surface transportation. But it is beset with rail bed challenges from the shifting tundra.

Gord Peters, the founder and chairman of the Brandon-based shortline operator, Cando Contracting, said it still needs a minimum of $200 million to get it up to industry standards.

“That’s the collective wisdom of rail industry experts and anyone who says they could do it for for say, $25 million, are dreaming,” he said.

Omnitrax officials have refused to make any public statement for three days after layoffs at the Port of Churchill were announced on Monday and a reduction in freight service to Churchill from two trains per week down to one on Wednesday.

Late last year the company said it wanted to sell the port and the railway. Then in January it was disclosed that the Denver-based company was in discussions to sell the business to a consortium of Northern Manitoba First Nations.

For several months both sides said the negotiations were progressing but such a transaction now seems unlikely.

Meanwhile, grain shippers seem to have lost interest in Churchill’s northern port that once served as the terminal for up to 700,000 tonnes of grain shipped to Russia, the Middle East and South America annually.

And that is despite a Federal government incentive that was introduced in 2012, the year the former Harper government passed legislation ending the Canadian Wheat Board’s marketing monopoly on Prairie grain. In the past, the wheat board was responsible for most of the grain shipped out of Churchill.

This year the incentive has been increased to $12 per tonne, up from $9.20. The subsidy is scheduled to end in 2017.

But companies like Richardson International, that regularly shipped tens of thousands of tonnes of grain annually through Churchill, are bypassing the northern port entirely.

“As of today we have no shipments booked through Churchill this year,” said Tracey Shelton, a spokeswoman for Winnipeg-based Richardson. “And we’re not the only ones.”

She said the company makes commercial decisions on where to ship grain based on a number of different factors, including the types of commodity being shipped and customer preferences.

In Richardson’s case, it just opened a newly expanded $140-million terminal in Vancouver that it can ship between five and six million tonnes per year out of. It also owns three others and has an equity stake in two more located on the B.C. coast, Thunder Bay, Hamilton and Quebec.

“There are certainly factors that make Churchill a challenge,” she said. “One, it handles very small volumes of grain and it has a very short shipping season.”

It is expected that the 14 week season from the beginning of August to late October or early November will get extended now that the polar ice is breaking up due to global warming. But the lack of ice breakers and tug boats and less than ideal naval safety infrastructure means insurance rates are high and freighters are reluctant to call at the port.

And with huge demand and upgraded facilities on the west coast — not to mention all year service — grain shippers likely need more than a $12 per tonne incentive to use the Port of Churchill.

“The port facilities definitely have challenges,” Shelton said. “It is an older facility and operating conditions are not prime.”

martin.cash@freepress.mb.ca

Martin Cash
Reporter

Martin Cash has been writing a column and business news at the Free Press since 1989. Over those years he’s written through a number of business cycles and the rise and fall (and rise) in fortunes of many local businesses.

   Read full biography