Premier Danielle Smith recently announced Alberta’s support of an energy corridor to Churchill and Conservative Party leader Pierre Poilievre announced his support for shipping oil through Churchill in the spring. Both clearly believe in unshackling Canadians from their bureaucratic chains, so now is the time to embrace this opportunity..The idea isn’t new. Canada has a long history of shipping resources from Western Canada to consumers in eastern Canada and Europe. King Charles II of England granted the Charter that created the Hudson Bay Company on May 2, 1670 primarily for the purpose of shipping beaver pelts back to England, but also for the exploration of other natural resources and to search for the North West passage. Since that time, trade flourished with the indigenous communities and was reliant upon their participation for its success..Around 1900 however, visionaries in the Canadian government spearheaded the development of Port Nelson on the Manitoba Hudson Bay coast, to ship Western Canadian resources to Eastern Canadian and European markets. Port Nelson itself had a population of nearly 1000 people at that time. Sadly, with the First World War consuming labour and materials, limited technical ability at the time to handle silt flows from the Nelson River, equipment that was inadequate to the task and bad weather to boot, the project went on hold and was ultimately abandoned. This led later to the development of Churchill as the alternative port, given its more sheltered and deeper harbour. It shipped its first grain in 1931..The port and railway were sold to the Arctic Gateway Group in 2018, a partnership between indigenous communities and insurance giant Fairfax with grants from the federal government totalling more than $120 million. Minor repairs were made to get the railway operational and rail transportation resumed after being shut down for about 18 months due to annual spring flooding..In 2021 Fairfax “tossed the keys” to their indigenous partners who promptly went back to the federal and Manitoba provincial governments and received an additional $200 million to fund operational and key maintenance costs to maintain the railway system and Port of Churchill itself..Set this background against unemployment of 28.3% in Northern Manitoba, the Thompson nickel belt running on extended life, new under-utilized hydro dams, the energy crisis in Europe and changing supply chains and it all adds up to opportunity for a port on Hudson Bay that will benefit more than just Western Canadians..So hold on. Why can’t this Port pay for itself? Aren’t there major back ups in Canadian ports right now? Is it because of the ice? Muskeg? Is it a financial black hole?.The answer is complex and in this age of sensationalized tweets short changing substance I’ll be brief. These are broadly the challenges:.1. The last 300km of rail to Churchill goes over a lot of muskeg. When frozen it's fine for rail transport, but many months are soft so the train can only carry lighter loads and travel at approximately 15-km/h. The rail needs a lot of maintenance as spring thaws and higher river flows threaten to wipe out small sections of the railway every year..2. The grain handling terminal needs an upgrade if it's to be used more than a couple times a year..3. The wharf needs investment after several years of neglect..4. The tank farm has since been dismantled, so a rebuilt operation would require new tanks and associated equipment if it were to be used on an economically viable basis supplying regional consumers of diesel fuel, for example..5. The first year ice, which is soft and manageable. For many months a year there is no ice, (generally June to early November.).6. Currently there are perhaps one to three grain ships per year, some small cargo volumes supplying Churchill and regular passenger service trains twice per week to Churchill. This is not economically viable even if the rail line was on solid ground..7. The rail line needs more sidings, (where trains can pass each other), to handle more volume.The bottom line is for the rail and port to be viable, it needs volume. That means multiple commodities and perhaps even smaller container ships..So why aren’t there volumes?.Given the inability to build pipelines in Canada, shipping oil through Hudson Bay is the best opportunity to achieve economic viability of the rail system and wean itself off of taxpayer funding..Second, the last 300-km of rail line over muskeg means trains must go slowly and with lighter volumes. This impedes the economics of oil rail car shipments to Churchill..Third, shipping through ice is done in many northern countries, but particularly Finland and Russia. The Canadian shipping company FedNav has shipped bulk commodities through Arctic ice for 75 years. More ships and committed volumes to amortize the cost of the ships and loading infrastructure are required..Fourth, insurance costs for shipping outside the ice free shipping season are very onerous, if not impossible, to secure and is a puzzle to be solved that's probably only addressed through a government insurance program. Fortunately, the Canadian government is launching new ice breakers that will soon be ready for operation. .Finally, the political will to support a visionary plan that will benefit all Canadians and support energy-starved Europeans from Russian aggression should be supported and applauded. After all, Prime Minister Trudeau is offering the Germans pilot-scale hydrogen plants, possibly available in 15 years, as a solution to their energy crisis this winter. Certainly this could be operating within five years..So unless you choose to limit your knowledge of shipping through ice to the movie Titanic, let’s focus on solutions..Hint: I’m not advocating for shipping oil through Churchill, but another port. That is the subject of tomorrow’s article..Jeff Callaway is the president and CEO of High Ground Medica, executive VP and CFO of Blacksteel Energy, and chairman of the Western Standard. .This is the first of two articles: The second runs tomorrow.
