OmniTRAX Canada Inc. unlikely to ship Bakken and Western Intermediate sweet crude oil from Port of Churchill this summer

No specific permits or approvals required from Transport Canada before shipping can start, but company president Merv Tweed says, 'We probably aren't going to do it this year'

While there are no specific permits or approvals required from Transport Canada before OmniTRAX can start shipping Bakken and Western Intermediate sweet crude oil bound for markets in eastern North America and Western Europe on 80-tanker car Hudson Bay Railway trains from The Pas to Churchill and then from the Port of Churchill on Panamax-class tanker ships out Hudson Bay to sea, OmniTRAX Canada Inc. president Merv Tweed told the Nickel Belt News in a telephone interview from Winnipeg June 11, "We probably aren't going to do it this year."

Tweed said, "We still have more consultation to do."

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OmniTRAX Canada is a wholly owned subsidiary of the Denver-based short line railroad, which owns Hudson Bay Railway. OmniTRAX is an affiliate of The Broe Group and was founded in 1986 and is privately owned by Pat Broe, who founded the company in Denver in 1972 as a real estate asset management firm.

Tweed said in terms of shipping oil to markets in eastern North America and Western Europe from Churchill, OmniTRAX is at the point where they have hired a third party consultant to critique their business plan before moving forward. The critique is nearly, but not quite, complete, he said. "Because of the timing we just don't feel that it's going to be possible to do it this year." Stretching 1,500 kilometres at its widest extent, Hudson Bay is the world's largest seasonally ice-covered inland sea.

When the ice goes out next month, there is a 14-week shipping season from July 15 to Oct. 31, says the Winnipeg-based Churchill Gateway Development Corporation, established in June 2003 for the purpose of marketing the Port of Churchill through diversifying the traffic base and building two-way traffic. Churchill Gateway Development Corporation is a non-share, public-private partnership and includes representation from the federal government, through Western Economic Diversification Canada, the Province of Manitoba and OmniTRAX, Inc., the private owner and operator of the Port of Churchill and the railway that serves the port, the Hudson Bay Railway. OmniTRAX, Inc. and Churchill Gateway Development Corporation share office space on the fourth floor of 191 Lombard Ave. in Winnipeg and Tweed is president of both. With only two other employees at the Churchill Gateway Development Corporation, executive director Jeff McEachern, and project co-ordinator Tricia Chestnut, who both use OmniTRAX e-mail addresses, the two legal entities function as one for all intents and purposes.

Initially, OmniTRAX had hoped to ship 330,000 barrels of crude oil from the Port of Churchill in a test, but given it is now almost mid-June, the window of shipping season opportunity for 2014 is likely too short even for that, Tweed said, although OmniTRAX was able to ship grain and oilseeds through the port until almost mid-November last fall.

The Port of Churchill has the largest fuel terminal in the Arctic and is North America's only deep water Arctic seaport that offers a gateway between North America and Mexico, South America, Europe and the Middle East.

"And, you know, with the glut of grain that's on the market, we're really focussed on that," Tweed said. "It looks like a very positive shipping season for us. Volume and inquiries are up, so we're hoping we can do it with grain this year for sure."

Tweed said they're hoping for a record year for the Port of Churchill. In 2013 the port moved 640,000 tonnes of grain and oilseeds, its highest amount in the past five or six years, Tweed said. Wheat accounted for most of the grain loaded during the season, with some durum and canola also being shipped. In addition to grain and oil seeds, the shipping season also included three vessels loaded with re-supply shipments, which included petroleum products, for Nunavut.

This year the goal is 700,000 tonnes of grain and oilseeds, he said. In 1977 an all-time record 816,000 tonnes were shipped from the Port of Churchill. OmniTRAX is on a Canadian National (CN) interchange at The Pas and relies on CN for the grain-filled cars. Last year, OmniTRAX received slightly less than 7,000 grain-filled cars for Churchill at The Pas, and hopes to get 8,000 to 8,500 this year, he said.

OmniTRAX operates a network of 16 regional and short line railroads that cover 10 states in the United States and three provinces in Canada. The company's railroads interchange with BNSF Railway, Canadian National (CN), CSX Corporation, Norfolk Southern Railway and Union Pacific Railroad and transport commodities within the agricultural, aggregate and industrial mineral, energy, food, chemical, lumber, metal, petroleum and plastic industries.

But OmniTRAX has also moved over the last three years to diversify the commodity mix the railway and port handle here in Manitoba in the wake of the federal government legislating the end of the Canadian Wheat Board's grain monopoly, creating a new grain market. OmniTRAX says transporting just grain will not be enough to sustain their Manitoba business over the longer term, and even if they have a good or even a record year this year, that's still the company's position, Tweed said.

Thirteen grain cars of a 50-car load on an OmniTRAX Canada-owned Hudson Bay Railway freight train derailed en route to the grain storage facility at the Port of Churchill June 2. Bad weather last week after the derailment about 32 kilometres south of Churchill delayed OmniTRAX re-railing efforts and track repair efforts and the track did not reopen until 7 p.m. June 9.

Canada's oil producers are still looking for a "Plan B" on Manitoba's coast as the proposed Northern Gateway and Keystone XL pipelines futures remain unclear, Tweed said Wednesday, with more oil than ever being shipped by rail and the demand growing every year. The number of rail cars used to transport oil in Canada has more than tripled in recent years, rising from a low of 4,549 in June of 2011 to 14,217 by April 2013, according to a report last year by Poten & Partners, a global broker and commercial advisor for the energy and ocean transportation industries. More than 94,000 tank cars are used to transport crude oil and ethanol in service in Canada and the United States.

Last year, OmniTRAX talked to more than 25 Alberta oil companies interested in shipping oil through the port to refineries on either the east coast of Canada or in Europe. The Port of Churchill is among a growing number of potential options for diversifying oil exports as production climbs and major pipeline proposals face lengthy regulatory delays.

Glyniss Hutchings, the regional communications officer for Transport Canada's Prairie and Northern Region in Winnipeg, said in June 9 e-mail that while no specific permits or approvals required from Transport Canada before OmniTRAX can start shipping oil from Churchill, "Transport Canada has informed the company of the regulatory requirements it must meet under the Railway Safety Act, Transportation of Dangerous Goods Act, 1992 and the Canada Shipping Act, 2001.

"If OmniTRAX proceeds with their plans after Sept. 20, when Protective Direction No. 33 comes into effect, the shipper must have a Transport Canada approved Emergency Response Assistance Plan (ERAP). OmniTRAX, cannot transport the dangerous goods unless an ERAP is in place," said Hutchings.

"Transport Canada will verify that regulatory requirements are met prior to the first shipment of oil," she added.

Along the Hudson Bay Railway, communities, stations and whistle stops include The Pas, Wabowden, Lyddal, Odhil, Hockin, Thicket Portage, Leven, Thompson Junction, Sipiwesk, Pikwitonei, Kelsey, Bridgar, Pit Siding, Ilford, Wivenhoe, Gillam, Bird, Sundance and on the final Bayline stretch north to Churchill, Amery, Charlebois, Weir River, Lawledge, Thibaudeau, Silcox, Herchmer, Kellett, O'Day, Back, McClintock, Cromarty, Belcher, Chesnaye, Lamprey, Bylot, Digges, Tidal, Fort Churchill and Churchill.

OmniTRAX created Hudson Bay Railway in 1997, the same year it took over operation of the Port of Churchill. It operates 627 miles of track in Manitoba between The Pas and Churchill. OmniTRAX Canada, Inc. bought the Northern Manitoba track from CN in 1997 for $11 million. It took over the related Port of Churchill, which opened in 1929, when it acquired it from Canada Ports Corporation, for a token $10 soon after buying the rail line.

"The 'On-to-the-Bay' Association was formed in 1924 to demand completion of the Hudson Bay Railway and Port of Churchill in the interests of the people of western Canada," Sinclair Harrison, of Moosomin, Sask., president of the Hudson Bay Route Association (HBRA), the successor of On-to-the-Bay, has noted. The Hudson Bay Route Association remains active in promoting a "Churchill Transportation Corridor."

The track finally reached Churchill on March 29, 1929. The last spike, wrapped in tinfoil ripped from a packet of tobacco, was hammered in to mark completion of the project: an iron spike in silver ceremonial trappings.

OmniTRAX has owned and operated the Churchill Marine Tank Farm, a 50-million litre petroleum storage facility located at the Port of Churchill, since August 1997. The tank farm stores various petroleum products such as, gasoline, diesel, heating oil, and aviation fuel. The facility manages petroleum products in both bulk and barrelled forms. The Churchill Marine Tank farm provides bunkering services for vessels and provides fuel resupply services to Northern communities, including in Nunavut. A pipeline runs from the tank farm to the port for liquid bulk vessel loading.

Petroleum products have been shipped to Churchill by rail for more than 50 years without an oil spill to date. Most of OmniTRAX's current petroleum product business in Churchill is moving barrels of avgas (aviation fuel) for use in helicopters in exploration or at the Churchill Airport.

The 60-page Federal-Provincial Task Force on the Future of Churchill, released in January 2013, and written by Daphne Meredith, deputy minister for Western Economic Diversification Canada, and Don Norquay, then Manitoba's deputy minister for strategic partnerships, which consulted 60 individuals, included among the "opportunities" identified by the joint Canada-Manitoba task force as possible over the next five years: "Ship light sweet crude oil by rail to Churchill for export from areas without sufficient pipeline capacity through private sector partnerships with east-coast refiners and oil producers. This opportunity is subject to fully addressing all potential environmental risks to sensitive Arctic ecosystems."

Under the federal Railway Safety Act, OmniTRAX does not require any specific permit to transport oil by rail, Brian Williamson, a regional communications officer with the Prairie and Northern Region of Transport Canada in Winnipeg, said last Sept. 19 e-mail to the Nickel Belt News.

"Should OmniTRAX proceed with its plans, Transport Canada Rail Safety and Transportation of Dangerous Goods (TDG) inspectors will monitor operations for compliance with the Railway Safety Act and Transportation of Dangerous Goods Act and regulations," Williamson said. "This includes verifying that the track is compliant with the Track Safety Rules prior to the trial shipment of oil, as well as monitoring for compliance with applicable rail equipment, rail operating and transportation of dangerous goods rules, regulations and standards.

"Transport Canada's oversight role includes monitoring railway companies for compliance with rules, regulations and standards, as well as the overall safety of railway operations through audits, inspections, and investigations, and takes appropriate action as required.

"Under the Railway Safety Act, railway companies are responsible for the safety of their rail line infrastructure, railway equipment and operations. This includes ongoing inspection, testing and maintenance programs in accordance with regulatory requirements.

"Shipments of oil and gas must comply with the Transportation of Dangerous Goods Act, its regulations and standards.

"The Transportation of Dangerous Goods Act establishes the requirements for transporting a dangerous good in the proper means of containment for a mode of transport. It also establishes requirements for proper classification, training, reporting, safety marks and documentation. There are over 30 million shipments of dangerous goods every year in Canada with 99.999 percent of them reaching their destinations without incident," Williamson added.

Once the oil reaches the Port of Churchill, "OmniTRAX is subject to Part 8 of the Canada Shipping Act, 2001 whereby operators of oil handling facilities that load or unload oil from vessels are required to have an Oil Pollution Emergency Plan (OPEP) in place which details pollution contingency and response plans based on local conditions," Williamson said. "The OPEP must be submitted to Transport Canada for review. Transport Canada reviews the OPEP for compliance with applicable regulations and rules for Oil Handling Facilities under the Canada Shipping Act, 2001. Transport Canada inspects Oil Handling Facilities to verify compliance with the regulations and confirms that an OPEP is in place."

Hutching said last Oct. 18 "Transport Canada has reviewed OmniTRAX's preliminary Oil Pollution Emergency Plan and has provided comments."

Ships entering the Hudson Strait and Hudson Bay are subject to the federal Arctic Water Pollution Prevention Act. The act creates a regulatory time and date zone that may restrict vessel navigation if ice is present.

These navigation restrictions are found above 60 degrees north latitude in the Hudson Strait. Vessels of Type A andB Class are permitted into the zone from June 25 to Nov. 30.

Vessels of Type C Class are permitted from July 1 to Nov. 15. Vessels operating in the region outside of these dates are subject to the Arctic Ice Regime System (AIRS). AIRS is administered by Transport Canada Marine Safety. AIRS considers vessel condition and crew experience to determine the ability of a vessel to enter the zone. Vessels operating outside the zone data system may still enter using the AIRS and a qualified ice navigator.

Conservative federal Transport Minister Lisa Raitt said last Dec. 12 the federal government would, for the first time, designate crude oil as a highly dangerous substance and introduce tougher safety and testing measures for shipping oil by rail, in the wake of last July's Lac-Mégantic, Que. tragedy where investigators later found the oil was far more volatile and dangerous than shippers and regulators initially considered it to be.

A special working group inside Transport Canada, led by Chris Powers, retired from the Canadian Association of Fire Chiefs in Ottawa, came up with the 43-page Jan. 31 Report and Recommendations of the Transportation of Dangerous Goods General Policy Advisory Council (GPAC) Emergency Response Assistance Plan (ERAP)Working Group Relating to Class 3 Flammable Liquids, including crude oil, which moves oil to the highest level of dangerous goods.

The Transportation Safety Board of Canada continues to investigate the derailment and fire involving a freight train operated by Montreal, Maine & Atlantic Railway (MMA) in Lac-Mégantic last July 6.

To date, the Transportation Safety Board of Canada has made a number of recommendations to the Department of Transport and the U.S. Department of Transportation Pipeline and Hazardous Materials Safety Administration, including recommendations that all Class 111 tank cars used to transport flammable liquids meet enhanced protection standards that significantly reduce the risk of product loss when these cars are involved in accidents; the Department of Transport set stringent criteria for the operation of trains carrying dangerous goods, and require railway companies to conduct route planning and analysis as well as perform periodic risk assessments to ensure that risk control measures work; and that the Department of Transport require emergency response assistance plans for the transportation of large volumes of liquid hydrocarbons.

Under the Canadian Transportation Accident Investigation and Safety Board Act, Raitt had 90 days from Jan. 23 to formally respond to the three TSB recommendations and explain how she had addressed or will address the safety deficiencies.

On April 23, Raitt signed a number of responses to those recommendations, including one addressing DOT-111 tank car vulnerabilities that says, "Transport Canada will immediately and unilaterally prohibit the use of the highest risk group of older DOT-111 tanks cars. A protective direction under subsection 32(1) of the Transportation of Dangerous Goods Act, 1992, will be issued on April 23, and will prohibit the use of those tank cars that have no continuous reinforcement of their bottom shell for carrying any Class 3 flammable liquid, including crude oil and ethanol. Industry will have 30 days from this date to fully comply.

"Transport Canada will require that all pre-CPC 1232/TP 14877 tank cars used for the transportation of crude oil and ethanol be phased out of service or refitted within three years.

"In the interim, the train routing restrictions outlined below are designed to reduce these risks. As North America's integrated market necessitates close co-operation, it is important that in the longer term, Canada harmonizes with the U.S. to the greatest extent possible. However, in this area, Canada will move more aggressively to address the safety concerns of Canadians. The departmental objective will be to meet or exceed any new U.S. standards, so officials will continue to work closely to harmonize and accelerate the technical work required to develop future, more stringent tank car construction and re-fit standards to further enhance the safety of Canadians.

"In addition, to ensure that the safety standard for these tank cars continues to be enhanced, to address the immediate safety issues, and as recommended by the Transportation of Dangerous Goods General Policy Advisory Council Working Group on Means of Containment, the department will proceed expeditiously with Canada Gazette, Part II publication of 13 updated means of containment standards, including the 2011 standard for DOT-111 tank cars. Canada introduced this revised DOT-111 tank car standard for consultation on Jan. 11, proposing the requirement of end-of-tank protection, thicker and more impact-resistant steel tanks, and protected top fittings, to improve accident performance."

On addressing route planning and analysis for trains carrying dangerous goods, Raitt signed a response that "Transport Canada will issue an emergency directive under Section 33 of the Railway Safety Act that will require railways carrying dangerous goods to implement minimum key operating practices to address the board's recommendation and manage the immediate safety issue, including speed restrictions for trains carrying dangerous goods, expansion of inspection requirements on restricted rail routes, and the completion of risk assessments for rail transportation routes. These requirements are built upon voluntary approaches in the U.S., but also take into account differences in Canadian operations and areas where Canadian requirements are already more stringent.

"The emergency directive would be in force for six months and may need to be renewed to reflect further consultation with stakeholders, including the Federation of Canadian Municipalities, unions and consideration of any additional U.S. requirements that may be established. Any further safety advisories or recommendations in this area from the TSB will also need to be taken into account.

"At the same time, Transport Canada will also issue a ministerial order under Section 19 of the Railway Safety Act requiring railways carrying dangerous goods to formulate and submit for approval new rules based on these operating practices, to further improve the safe transportation of dangerous goods by rail in the long term."

On addressing requirements for Emergency Response Assistance Plans, Raitt signed a response that "Transport Canada will immediately issue a protective direction under the Transportation of Dangerous Goods Act, 1992, effective April 23, to require shippers to develop Emergency Response Assistance Plans (ERAPs) for specific higher-risk hydrocarbons (petroleum products, crude oil, gasoline, diesel, aviation fuel) and ethanol for any train with one or more loaded tank cars of these products.

"The department will also announce the establishment of an emergency response planning taskforce with members from key partners and stakeholders. This group will provide a dedicated forum with support from a team of experts to respond to recommendations of the Transportation of Dangerous Goods General Policy Advisory Council Working Group on Emergency Response Assistance Plan requirements. The taskforce will focus on ERAP activation processes, support the development of co-operative industry approaches to ERAP development and the development of information sharing protocols, and promote the development of unified incident command structures. The taskforce will also review and provide advice on the possible expansion of Emergency Response Assistance Plan requirements to other Class 3 flammable liquids."

Asked what bearing, if any, the Jan. 31 Report and Recommendations of the Transportation of Dangerous Goods General Policy Advisory Council (GPAC) Emergency Response Assistance Plan (ERAP) Working Group Relating to Class 3 Flammable Liquids might have on OmniTRAX's plan announced last summer to ship light sweet unrefined oil, beginning in July when Hudson Bay opens up, from The Pas to Churchill, and then on to markets in eastern North America and western Europe, Glyniss Hutchings, the regional communications officer for Transport Canada's Prairie and Northern Region in Winnipeg replied by e-mail June 9:

"Transport Canada takes the safety and security of the railway and transportation of dangerous goods systems seriously and is committed to ensuring that appropriate levels of safety are maintained. On April 23, Transport Canada announced decisive action to address the Transportation Safety Board's recommendations and further strengthen Canada's regulation and oversight of rail safety and the transportation of dangerous goods.

"Under the authority of the Transportation of Dangerous Goods Act, Transport Canada issued Protective Direction No. 33 that requires shippers to develop an Emergency Response Assistance Plan (ERAP) for crude oil, gasoline, diesel, aviation fuel, and ethanol. An ERAP is required when a single tank car contains one of these designated flammable liquids. Protective Direction No. 33 took effect on April 23 and any person who imports or offers for transport these flammable liquids must submit a ERAP to Transport Canada for approval within 150 days.

"An ERAP is a formal plan that describes what industry will do to support first responders in the event of an accident involving their dangerous goods that require special expertise and response equipment. The ERAP assists municipalities and local emergency responders by providing them with around the clock technical experts and specially trained and equipped emergency response personnel at the scene of an incident.

"Transport Canada has also issued an emergency directive under Section 33 of the Railway Safety Act, which requires railway companies that operate "key" trains (those that are carrying specified quantities and types of dangerous goods) at speeds to not exceed 50 miles per hour, and to meet other operational and equipment requirements. This responds to the Transportation Safety Board of Canada's recommendation. The emergency directive was issued April 23 and will remain in place for a minimum of six months.

Under Section 19 of the Railway Safety Act, Transport Canada has issued a ministerial order that requires railway companies transporting dangerous goods to develop new permanent rules on operating practices. Railway companies have 180 days to submit the rules to Transport Canada for approval. The department will review the rules to promote the safe transportation of dangerous goods by rail.

"Transport Canada also issued a protective direction that requires the immediate phase-out of the least crash-resistant tank cars. Tank cars being removed from service are those that are not equipped with continuous bottom reinforcement, which pose a much higher risk of failure in a derailment."

Hutchings said June 9, "While there are no specific permits or approvals required from Transport Canada" before OmniTRAX can start shipping oil out of Churchill, "we have informed the company [OmniTRAX] of the regulatory requirements it must meet under the Railway Safety Act, Transportation of Dangerous Goods Act, 1992 and the Canada Shipping Act, 2001. If OmniTRAX proceeds with their plans after Sept. 20, when Protective Direction No. 33 comes into effect, the shipper must have a Transport Canada approved ERAP. The carrier, in this case OmniTRAX, cannot transport the dangerous goods unless an ERAP is in place."

"Transport Canada will verify that regulatory requirements are met prior to the first shipment of oil."

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