The federal government has taken legal action against OmniTrax for its failure to resume operations on the rail line to Churchill, Man.
U.S.-based OmniTrax responded by filing notice that it will submit a claim under the North American Free Trade Agreement alleging that the federal government put it at an unfair advantage relative to southern Canadian-owned railways when it ended the monopoly of the Canadian Wheat Board, which had been the one major user of the Hudson Bay Railway and the Port of Churchill.
The Attorney General of Canada acting for Transport Canada today filed a statement of claim against OmniTrax, which owns the rail line and port, saying that it breached its contract when it failed to repair the line and resume service.
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This spring, severe flooding washed out several sections of the line between Gillam and Churchill, Man.
OmniTrax, said repairs would cost as much as US$60 million and it wasn’t prepared to pay without government assistance.
“OmniTrax Inc. did not fulfill its obligations under the terms of the contribution agreement it signed with the Government of Canada in 2008,” Transport Canada said in a news release.
Under that agreement, the federal government provided $20 million for the rehabilitation of the rail line between The Pas and the Port of Churchill, Man. So far, Canada has paid out $18.8 million.
The 2008 agreement requires that OmniTrax Inc. operate, maintain and repair the entire line “in a diligent and timely manner” until March 31, 2029.
If it significantly reduces, discontinues abandons or sells the line it must repay Transport Canada, the news release said.
Meanwhile OmniTrax under Chapter 11 of NAFTA wants independent arbitration saying negotiations with the federal government to resolve the problems and transfer ownership of the line and port have failed largely because of obstructionism on the part of Ottawa, according to news reports on the issue.
At least two groups comprising northern Manitoba First Nations have expressed interest in taking over the line.
The Manitoba government has said it would provide money to help fix the line and maintain service.
News reports about the OmniTrax NAFTA filing say OmniTrax argues that the federal government’s decision to end the Canadian Wheat Board in 2012 was discriminatory against OmniTrax because it drastically cut the amount of grain moved up the Hudson Bay Railway to Churchill.
Once the open market was established, grain buyers chose to use Canadian National Railway and Canadian Pacific Railway to transport grain to terminals the grain companies owned on the west coast and at Thunder Bay.
