OmniTRAX Canada has bowed to public pressure and has decided to suspend the railway company’s early plan to test the viability of sending crude oil by rail to Churchill, which is Canada’s only deep water Arctic seaport. When announcing the suspension, OmniTRAX put a good-news spin on their decision, citing increased grain shipments as a major reason.
“Our decision to suspend crude by rail was based in part that grain shippers were willing to commit long-term orders in contracts of over 700,000 metric tonnes due to the market’s overall growth,” said Merv Tweed, the president of OmniTRAX Canada. “Following last year’s record crop, we’re prepared for another strong shipping season.”
Actually, the record crop can be see as a public-relations saviour for the company and the basis of a win by critics of shipping crude by rail, including environmentalists and First Nations people living in northern Manitoba. Tweed acknowledged that consultations with First Nations, Métis and the provincial government were also important factors in the company’s decision to suspend shipping crude by rail.
CN said Canada’s rail transportation system is ready to accommodate the new harvest with a solid throughput rate in line with the grain supply chain. The supply chain will also be able to address the excess carry-over from last year’s extraordinary crop by as early as next spring.
Claude Mongeau, president and chief executive of CN, said the performance in the 2013-14 crop-year for the movement of Western Canadian grain was a full 25 per cent greater than past average performance.
The increase in performance also put on hold federal action to pursue a regulatory agenda to force the railways to move more grain.
Mongeau said CN transported record grain volumes last fall until extreme cold weather affected the rail industry’s ability to move grain efficiently between mid-December and early March. In February, CN promised the federal government it would ramp back up to record performance as soon as the weather eased. The weather clearly challenged CN’s operations, he added, but the company’s winter grain shipments ultimately turned out to be only two per cent below normal winter volumes.
CN’s run rate of spotting approximately 5,500 grain hopper cars per week since April 2014 has exceeded unconstrained orders placed by its customers, and its wait-list has declined significantly in the last few months due to a high level of order cancellations. As such, CN’s wait-list now represents a normal level of only one week of shipments.
Still, there is an obvious need for more options for grain shipping and OmniTRAX has sensed an opportunity to contribute to the company’s viability and avoid the controversy of shipping crude by rail. At the same time, it may finally be able to realize the long-anticipated dream for the railway to be a major handler of prairie grain — the “farmers’ dream” of their own rail line to ship prairie grain to the world that was first conceived in the 1880s.
OmniTRAX purchased the CNR line to Churchill in 1997 for $11 million, as well as the port facilities for a token $10, and continues to seek a positive outcome to the original “farmers’ dream.”
In 2013, the Port of Churchill handled over 600,000 metric tonnes of grain. On the other hand, CP and CN handle grain in amounts of millions of metric tonnes. Agriculture Canada said the carry-over from the crop-year just ending will be about 18 million tonnes, which means that there’s plenty of grain to go around for the transportation companies.
Churchill, Manitoba, is Canada’s only deepwater Arctic seaport. On the other hand, Russia possesses 16 such ports, making it the major northern player in the global warming sweepstakes associated with ships traversing a growing ice-free Arctic region. With Arctic ice leaving earlier in the spring and later in the fall, the prediction is that Churchill’s shipping season could be extended by 40 days from the present 110 days. The problem is that the port loads just 15 vessels each shipping season, making it a small player in the global warming sweepstakes when compared to Russia.
Churchill’s future survival as a deepwater Arctic port in a region of decreasing sea ice is tied to its ability to diversify by taking on other products besides grain to overseas markets and food, fuel and building supplies to Nunavut and other northern locations.
“After reviewing our current business operations,” said Tweed, “we are also developing a long-term substantiality strategy that will make policy recommendations to the provincial and federal government, as well as identifying critical infrastructure investments required to continue the development of the Northern Gateway trade corridor.”
OmniTRAX now annually ships almost 10-million litres of petroleum products, building and construction materials, as well as dry goods, vehicles and equipment. The company also ships products for mining companies, communities and individuals in the Far North. The company said it will be pursuing further products such as potash, feed and wood pellets to help the port’s long-term viability.
Shipping oil has become controversy in recent months. The Keystone XL and Northern Gateway pipeline proposals have been slammed by environmentalists and First Nations members, and the tanker car derailment that killed 47 people at Lac-Megantic in Quebec has thrown oil shipment by rail into disrepute.
There have been at least 10 accidents since 2008 involving freight trains hauling oil across North America. The accidents have resulted in derailments and the spillage of significant quantities of crude, with most of the accidents touching off fires or catastrophic explosions.
“Northern Manitobans and Wilderness Committee members are ecstatic today, as this risky oil-by-rail plan has been shelved,” said Eric Reder, the Manitoba campaign director for the Wilderness Committee. The committee called the plan to ship crude oil by rail “preposterous” and full of risks. “Thousands of Manitobans signed letters to both the federal and provincial governments to stop this crude plan,” added Reder. “People from around the world voiced their objection. Today we are all relieved.”
The number of tanker cars shipping oil across Canada has more than tripled to 14,217 cars as of April 2013, according to a report by energy and ocean transportation industry advisor, Poten & Partners. And the number of tanker cars is projected to steadily increase as the fate of proposed pipelines become unclear.
While the northern rail line is no longer in the running for shipping crude oil — “for the foreseeable future,” according to OmniTRAX — the fossil fuel will continue to be shipped by other rail companies as North American pipeline capacity fails to meet production demands.
But for now, at least, OmniTRAX has avoided a public-relations nightmare by suspending its earlier proposal to ship oil by rail.
Real Estate News
Aug 21 2014 Issue
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