Feds file lawsuit against OmniTrax, which responds with NAFTA arbitration claim

American company that owns Hudson Bay Railway and Port of Churchill seeking damages of over $150 million if agreement on repairs and ownership transfer isn’t reached

The dispute over what can be done to restore train service to the portion of the Hudson Bay Railway (HBR) between Gillam and Churchill, which has been shut down since May, escalated from mere words to legal filings Nov. 14.

As it pledged to do a month ago, the federal government filed a statement of claim against Denver-based OmniTrax for breach of contract, saying that a 2008 contribution agreement requiring the company, which also owns the Port of Churchill and the Churchill Marine Tank Farm, to operate, maintain and repair the HBR until 2029, has not been adhered to.

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“Our government remains committed to the people of Churchill and Northern Manitoba and we recognize the importance of the rail line for the community,” said Transport Minister Mac Garneau in a Nov. 14 news release. “We also believe it is important to hold OmniTrax accountable and that is why we are moving ahead with legal action. We are optimistic that interested buyers can develop a viable, sustainable business plan towards owning and operating the line. As such, we are moving ahead with legal action. We continue to support the honourable Wayne Wouters, the government’s chief negotiator, in the ongoing discussions with OmniTrax Inc., interested buyers, and community leaders.”

The federal government says it has provided more than $18 million of $20 million pledged under the agreement to rehabilitate the rail line between The Pas and Churchill and that, overall, OmniTrax has received more than $27 million from the government since it purchased the rail line and the Port of Churchill for about $11 million in 1997.

OmniTrax shot back with a legal filing of its own Nov. 14, serving notice of intent to submit a claim for arbitration under Chapter 11 of the North American Free Trade Agreement (NAFTA). The company says the federal government’s discontinuation of the Canadian Wheat Board single desk, which shipped grain through the Hudson Bay port, and opposition to the company’s plan to diversify its operations by shipping crude oil by train to Churchill, along with interference with efforts to sell its Northern Manitoba assets, amount to discrimination that violates NAFTA Article 1102, denial of its right to fair and equitable treatment under Article 1105, and unlawful expropriation under article 1110. The company wants the federal government to negotiate a reasonable arrangement to repair the HBR and transfer its assets to a third party. Failing that, it is seeking damages estimated to be in excess of $150 million.

Churchill Mayor Michael Spence said in a joint Nov. 14 news release with Thompson and The Pas that finding a new owner was the only way to begin planning for the future.

“It is vital that the assets be transferred to a stable northern regional ownership group,” he said. “The federal government has committed itself to that process and now is the time to start focusing on a plan to get an early start on spring repairs and future opportunities. Northern communities expect and require support from both the federal and provincial government. It will now be more than six months before the rail line will be fully operational and during this time our communities are faced with unacceptable extra costs and unnecessary challenges. It is imperative that we continue to work with and receive additional support from governments to address these ongoing challenges.”

A community meeting was held in Churchill Tuesday night and Spence said in a community update that followed it that residents are concerned that conflict between the federal government and Churchill will delay transfer of the port and railway’s ownership. 

“The mayor has received assurances from the federal government that they will continue to support negotiations towards the transfer of ownership without delay,” said the update. Churchill’s municipal government is also inviting representatives of the federal government’s Nutrition North program, which subsidizes food costs in remote communities, to visit the town to review prices. Spence said he and council and the town administration are also discussing flight options and costs with Calm Air.

Other communities along the rail line are also expressing frustration with OmniTrax and the delay in resolving the stalemate.

“We need a rail line operator who is committed to serve the city and our region, including the development of new opportunities,” said Thompson Mayor Dennis Fenske. “The current owner shut down the local office and cut rail service in half that has led to reduced fuel car shipments. Fuel shipments by truck raises both safety concerns along Highway 6 and a higher cost for fuel.”

“The current rail line owner has refused to talk directly to northern communities about their plans,” said The Pas Mayor Jim Scott. “We have watched in dismay as local workers are laid off and rail maintenance equipment is shipped south. At one time OmniTRAX had almost 200 workers in Northern Manitoba and now it appears we are down to just the final eight in The Pas. We need government action now.”

© Copyright Thompson Citizen

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