Politics trumps economics of keeping Churchill port open

Opinion

Hey there, time traveller!
This article was published 25/07/2016 (2825 days ago), so information in it may no longer be current.

What in the world is Omnitrax up to?

The Denver-based owner of the Hudson Bay Railway and Port of Churchill shocked many this week with a sudden decision to shut down its port facilities and lay off its 90 employees. In doing so, Omnitrax has put the future of the port, the community it supports, and the railway that serves as a lifeline for northern Manitoba, very much in doubt.

The big question making its way through the offices of key federal and provincial officials is: why this, why now? Other than brief comments to the employees affected by the port closure, Omnitrax has not been available to answer questions about its short- and long-term plans for Churchill. Calls to Omnitrax Canada president Merv Tweed, a former Tory MLA and MP, have gone unanswered.

In the absence of comments from the operator of the railway and port, this is a summary of what we do know.

It was no secret that Omnitrax was having a tough time finding the volume of grain shipments necessary to make the port a viable business. In fact, the decision to end the Canadian Wheat Board grain monopoly has seriously eroded grain shipments through Churchill. Previously, the CWB was Churchill’s single biggest customer. Government sources indicated the port had only been able to confirm about 35,000 tonnes of grain for this shipping season, a far cry from the 700,000 tonnes the port needs to be viable.

Still, there is much more than the shipment of grain going on in Churchill these days.

The tourism industry is booming right now. Churchill is also experiencing a renaissance in scientific research activity with two new centres of excellence, including the University of Manitoba’s $45-million Churchill Marine Observatory that will study the impact of Arctic oil spills. Churchill also remains a key resupply depot for the burgeoning mining activity across the eastern regions of Nunavut. Although grain shipments have dropped precipitously, there seems to be other opportunities in the offing, all of which rely in one way or the other on a fully operational railway and port.

Government officials at the federal and provincial level are, to put it mildly, dumbfounded at Omnitrax’s decision. Despite that fact, no one from either level of government would answer direct questions on the future of Churchill. Ottawa issued a statement from Innovation Science and Economic Development Minister Navdeep Bains indicating that he was monitoring the situation closely. The province issued a similarly vague statement from Enterprise and Trade Minister Cliff Cullen who promised to work with “our partners… to provide a stronger economic future for the region.”

Notwithstanding those platitudes, sources at both levels of government are clear that no one is particularly amused with what Omnitrax did this week. The consensus right now is that Omnitrax is trying to stoke fears about a more permanent closure of the port to prompt government to dig into its pockets for multimillion-dollar subsidies to keep the railway and port operator up and running.

The strategy is not without merit. Omnitrax got involved in northern Manitoba the late 1990s after CN, then-owner of the railway, threatened to pull up its tracks and abandon the line for good. That threat prompted the federal and provincial governments to negotiate a purchase from CN using taxpayer money. Omnitrax, the great private-sector saviour, was essentially paid to take over both the port and railway.

The government largesse has continued in one form or another for most of the last two decades. Tens of millions of dollars have been poured into maintenance and facility upgrades, while government has continued to lead the study of non-grain related business opportunities to make Churchill truly viable.

This time around, however, Omnitrax may find out that the days of direct operating subsidies or grants for facilities upgrades are coming to an end. Early indications from both federal and provincial sources are that neither level of government is going to rush to write a cheque.

“They’re playing a dangerous game that we just don’t want to encourage right now,” said one source. “They’re essentially holding a gun to their own head and threatening to pull the trigger. It’s ridiculous.”

To be fair, government is going to have to be involved at some point. Despite the fact that neither is self-sufficient, the railway and port are essential building blocks in the northern Manitoba economy. As a result, the political valuation of the Hudson Bay Railway and Port of Churchill is much higher than the market valuation. Neither the feds nor the province can afford to watch the north lose these valuable assets.

But how much support is too much? Omnitrax has already signalled its interest in selling the railway and port to a consortium of First Nations. It’s been hard to tell how serious Omnitrax has been about completing this deal; despite claiming publicly to be making progress, there is little to suggest that a sale is close to fruition. Grain industry sources claim the uncertainty about future ownership of the railway and port have done nothing to encourage anyone to use Churchill to move product.

For now, Churchill and indeed all of northern Manitoba has been thrown into yet another period of uncertainty. In the past, government has always been able to cobble together some sort of deal or package to keep everything up and running.

Omnitrax is clearly wagering that the two levels of government are willing to, once again, come to Churchill’s rescue. And maybe they will. But it appears more and more likely that everyone wants to see if Omnitrax has the guts to pull the trigger.

dan.lett@freepress.mb.ca