OmniTrax selling HBRY, Port of Churchill

Denver, Colo.-based short line holding company OmniTrax is selling the Port of Churchill and Hudson Bay Railway Company (HBRY) to an unidentified group of northern Manitoba-based First Nations for an undisclosed sum.

OmniTrax accepted a letter of intent for the purchase of its Manitoba assets, which it has operated since 1997, from the First Nations group on Wednesday, Dec. 16, 2015. “It’s a group of communities along the line and others that, you know, over the period of time have always believed the railway was theirs,” OmniTrax President Merv Tweed told CBC News. “This now can become a reality based on current negotiations,” a 45-day due diligence period expected last through mid-February 2016.

“My understanding … was that [OmniTrax] wouldn’t separate the port and the [railroad] and would sell them as an integrated system,” Churchill Mayor Mike Spence told CBC News, which also reported that Sheila North Wilson, grand chief of Manitoba Keewatinowi Okimakanak, which represents northern First Nations in the province, refused to comment on the deal.

HBRY owns and operates 627 miles of former Canadian National (CN) trackage with a network that connects with other railroads in Manitoba, running north through Manitoba to the Hudson Bay. HBRY, described by OmniTrax as “a vital transportation link in northern Manitoba,” hauls perishables, automobiles, construction material, heavy and dimensional equipment, scrap, hazardous materials, paper, concentrates, containers, fertilizer, wheat and other grain products. Major HBRY customers are HudBay Minerals, Tolko Manitoba, OmniTRAX Canada Freight Services, Imperial Oil, Petro Canada and Stittco Energy. VIA Rail operates remote services on HBRY using its Hudson Bay passenger train between Winnipeg and Churchill, Manitoba.

A downturn in grain shipments has put a strain on the 80-employee operation that prompted OmniTrax to announce in early December that it was looking for a buyer, CBC News reported. The Port of Churchill has reveived in 186,000 tonnes of grain this year, down significantly from an annual average of 550,000 tonnes. The railway, according to Tweed, is in good physical condition, and OmniTrax has made investments in the port facilities. But according to CBC News, Tweed has told the Canadian federal and Manitoba provincial governments that the company needs financial assistance to operate in the region and refuses to continue absorbing operating losses.

“If we’re seen as a social service to the north, which I think we are to some degree, then I think governments need to be prepared to support that,” Tweed told CBC News. “I hope that they see the value of the port and the value of the services provided to the other communities that we service. We service a lot of First Nations communities and we are their only source of transportation to [one] center. If governments want that to continue, which I believe they do, then I believe they should be a participant in the costs of that and we’ve explained that very clearly to them. We’ve shown them the costs of doing business in the north.” He added that OmniTrax has always encountered difficulties operating in northern Manitoba. “In the [past] couple of years, we’ve shone a hard light on it and said, ‘We can’t do this anymore.’”

However, Tweed indicated that, despite the low volume of available grain in 2015, OmniTrax expects harvest amounts will grow in 2016 and lead to northern shipments within the 500,000-tonne range.