Thursday, July 20, 2017

Sixty Million to Churchill?

Omnitrax held a press briefing on Tuesday, July 18 to present the results of the study that they commissioned to assess the flood damage to the rail line from Gillam to Churchill, Manitoba. The costs are.. high.

The Study

AECOM Canada, the engineering company that did the study, estimates that the line could be fixed in 60 days starting on September 1, for a cost starting at $13 million that could climb to $60 million.

The study says there are 13 bridges, 68 culverts and 31 washout areas that need to be repaired on the Hudson Bay Railway's Herchmer Subdivision's 183.7 railway miles (294 km) between Gillam and Churchill.

Omnitrax has stated that they don't have the money to fix it, and have called the line "a public utility" and they "believe there is a role for the public to play" in fixing the line.

Government Response

So far government response continues to be muted. The provincial government indicated it is looking to the federal government to lead. Meanwhile, the federal government indicates that Omnitrax has an obligation to repair the line.

Reports say that Omnitrax has received $20 million from the federal government over the past 5 years and Manitoba has contributed "millions". AECOM said that Omnitrax has spent $60 million on the line since 2009 to improve conditions, although this Financial Post article seems to call that figure into question.

A Deadline

Omnitrax stated that it has to have funding in place by August 1 to begin planning for the work to commence in September, and be completed within 60 days before it becomes too cold to work.

What Now?

There's no doubt that Omnitrax can't afford to fix the line. They are privately held, so their financials aren't available, but the estimate I found says the company's gross income is around $90-100 million USD. $60 million would be a tremendous burden. I assume they have some insurance to cover losses like this but nobody outside Omnitrax seems to know much about that. Many people are insisting that Omnitrax is holding the town of Churchill hostage for public funds.

As I said at the end of my last update, I still think the best course of action is for Omnitrax to immediately proceed with the sale it already negotiated, and then the federal and provincial governments can step in to pay for the repairs. It's clear that the governments are loath to contribute money to a private company - understandably - so Omnitrax has to be removed from the situation.

I can't see why Omnitrax would want to hold on to the line, except perhaps to get the best price for it. I have no doubt they are universally hated in Churchill, especially when they boosted the price of gas by 30 percent briefly last night.

So sell it already and let's get on with fixing the rail line and restoring service.

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