Ottawa to invest $117 million in Churchill and rail link repairs

The federal government plans to spend $117 million over the next 10 years to restore rail service between The Pas, Man., and the Port of Churchill in northern Manitoba.

In a Sept. 14 news release, the government of Canada said it is committed to restoring rail service on the Hudson Bay Railway.

The railway — previously owned by OmniTrax Canada — was recently acquired by the Arctic Gateway Group, an investment group that consists of Regina-based pulse exporter AGT Food and Ingredients, a collection of First Nations and northern Manitoba communities, and Toronto-based investment company Fairfax Financial Holdings.

Terms of the deal between Arctic Gateway Group and OmniTrax have not been disclosed.

Ottawa’s $117 million investment will be delivered through Western Economic Diversification Canada, with most funds to be used by the Artic Gateway Group over three years to carry out repairs to the railway.

A section of the railway between Gillam, Man., and Churchill has been inoperable since early 2017 when spring flooding washed out several sections of the track and terminated rail service to the Port of Churchill.

According to sources at Glacier FarmMedia, Ottawa will provide $74 million over three years to the Arctic Gateway Group for “acquisition and repair” of the Hudson Bay rail line and the port assets at Churchill.

Another $43 million will be paid out to Arctic Gateway over 10 years for “operations and enhancing the commercial viability” of the rail line, port terminal assets and the Churchill Marine Tank Farm facility.

The federal government is also expected to provide the Arctic Gateway Group with an additional “repayable contribution” valued at $10 million.

That money will be used as bridge financing until Arctic Gateway can secure its own financing.

Under the terms of the arrangement, the Arctic Gateway Group will not provide dividends to shareholders for at least 10 years, government sources said.

In its Sept. 14 announcement, the federal government characterized its investment in HBR as part of Ottawa’s commitment to renewing relationships with Indigenous peoples and northern Manitoba communities.

The deal “will create opportunities and economic prosperity in the region for years to come … (and) represents another step forward towards the equal and inclusive participation of Indigenous peoples in Canada …,” Ottawa said in its Sept. 14 news release.

However, a number of Western Canadian grain handlers and port operators have expressed concerns over the fact that a competing grain exporter — AGT — stands to benefit financially from Ottawa’s investment.

AGT has already indicated that it intends to use the port to move grain and other commodities on a commercial basis.

“It is important to separate the concept of (using) taxpayer dollars to support needs of the community of Churchill, from the concept of investing to support one business enterprise over others,” said Wade Sobkowich, executive director of the Western Grain Elevators Association (WGEA).

“The residents of Churchill are in need of reasonably priced goods and services,” Sobkowich continued.

But “in providing financial support, most free enterprisers would agree that the government must be careful it does not distort the marketplace. In an industry where competition is strong, that competition should dictate the terms of commerce without government interference.”

Tim Heney, chief executive officer at the Port of Thunder Bay, offered a similar view in a Sept. 17 email to the Western Producer.

“While revitalizing the rail line is one thing, subsidizing grain transportation to justify it is another,” Heney wrote. “The subsidy will be significant and ongoing in any case.”

Before its acquisition by the Arctic Gateway Group, the Hudson Bay Railway and the Port of Churchill were owned by OmniTrax, a company based in Denver, Colorado.

In the summer of 2016, OmniTrax announced that it would no longer ship grain through the Port of Churchill.

Contact brian.cross@producer.com

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