Churchill presses for Hudson Bay Railway deal before harsh winter

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Churchill is racing the clock to secure a deal that will transfer ownership of its railroad and port in time to make crucial repairs before the harsh Manitoba winter.

The town, 1,000 kilometres north of Winnipeg, has been without a land link for nearly a year after flooding wiped out railway bridges and tracks.

Long negotiations between the Hudson Bay Railway owner, governments, potential investors and First Nations communities have left the town reliant on airplanes for fuel and food.

Toronto-based Fairfax Financial Holdings Ltd. and First Nations consortium partner Missinippi Rail LP have been trying to buy the railway, port and other assets such as a petroleum storage facility for months and are pursuing a sale agreement with Denver-based owner Omnitrax Inc.

The bidders are looking to finalize the transaction within 30 days, or they say the much-needed repairs to the crumbling infrastructure will not be completed in time and Churchill will be left without a link for another winter. Omnitrax has said it will not pay to fix the tracks and restore train service, which it has estimated could cost $60-million.

As Fairfax and Missinippi negotiate, an opposing investor group made up of a consortium of Manitoba First Nations and a Canadian company called iChurchill Inc. issued a news release late on Thursday stating that they had entered “into [an] agreement to acquire Hudson Bay Railway and Port of Churchill from [its] U.S.-based owner.” Louis Dufresne, president of iChurchill, said that he couldn’t disclose the details of the “transaction under process” with OmniTrax owing to a confidentiality agreement.

According to incorporation documents filed with the federal government, iChurchill Inc. is a Calgary-based company whose directors include oil patch executive Robyn Lore, who has had a long career in Alberta’s energy sector. The other two directors are Mr. Dufresne and James McNeil, both of Calgary.

If iChurchill is successful, it would not be the first time the energy sector was associated with the port and railway.

Omnitrax planned to transport oil by rail to the port, where it would be loaded into tankers for overseas markets. The company said it could be done safely, but abandoned the plan in 2014 amid a public backlash from First Nations, the province and environmental groups.

Merv Tweed, president of Omnitrax Canada, said the company has recently received letters of interest from “several” Canadian companies. “As of this moment, no transaction has been completed,” he said in a statement. “We are continuing discussions with a number of interested parties.”

Paul Rivett, president of Fairfax, maintains that his investment group has broad support, and has reached an arrangement “negotiated by Grand Chief Dumas and involving the First Nations of Northern Manitoba, and all levels of government, including Canada, and municipalities, including the City of Churchill. This grand coalition of Nations and governments is committed to negotiate in good faith with Omnitrax to immediately repatriate ownership of the crucial northern railway and the Arctic gateway port in Churchill,” he said in a statement.

A spokesman for Jim Carr, Natural Resources Minister, said the federal government’s chief negotiator, Wayne Wouters, has been working on a deal involving Fairfax and members of Missinippi Rail Partners. “No negotiations with any parties will be conducted in public, but I would note that the government of Canada’s negotiating team has not had discussions with iChurchill,” Alexandre Deslongchamps said. It is expected that any deal would require financial support from the federal government.

A deal wouldn’t be immediately lucrative for Fairfax, and would represent a relatively small financial bet. The company has expressed some interest in the potential of an Arctic gateway to fuel economic development decades into the future. Churchill’s commercial deep-water port is a link to the shortest sea route between Canada and northern Europe, and could facilitate more trade in the future, especially as climate change lengthens the shipping season.

“Once repaired and re-established, the northern rail passage and the Arctic gateway port at Churchill will strengthen Canada by creating long-term economic trade benefits, particularly for the prairie provinces, with deep-water ocean access to the world,” Mr. Rivett said.

This is not a new idea. A decade ago, Omnitrax expressed enthusiasm for an “Arctic Bridge” from the Russian port of Murmansk, through Churchill and on into the United States. The federal government also invested in the idea at the time. But Omnitrax has not been able make that project profitable. Fairfax said it would seek a “commercially sustainable” plan.

Churchill Mayor Michael Spence said his town is working with the federal government and the Missinippi and Fairfax consortium, adding that he had not had discussions with iChurchill. “There is great urgency to arrive at a negotiated agreement as soon as possible,” Mr. Spence said. “I remain confident a transfer of ownership and restoration of rail service can move forward this spring and this remains my number-one priority.”

Mr. Wouters, Ottawa’s chief negotiator, could not be reached for comment on the plans, and Betsy Kennedy of War Lake First Nation, named in the iChurchill news release, was not available, her office said.

Mr. Dufresne noted the port has a short shipping season due to ice, and needs to be “underpinned by significant commercial activity” to economically viable. He said iChurchill has looked at restoring grain shipments, in addition to wood pellets, fertilizer and minerals. “And the possibility of oil has been asked of us. It is a possibility but it’s way too early to speculate what commodity will be most attractive,” Mr. Dufresne said by phone.