Feds file law­suit over bro­ken rail line

Times Colonist - - Business -

Ot­tawa filed a law­suit against the own­ers of a bro­ken rail line in north­ern Man­i­toba Tues­day, hours af­ter the com­pany said it would file a com­plaint against the fed­eral gov­ern­ment un­der the North Amer­i­can Free Trade Agree­ment.

The le­gal salvos are the lat­est in a bat­tle over the dam­aged track that is the only land link to Churchill, a town of 900 on the western coast of Hud­son Bay. The com­mu­nity has ex­pe­ri­enced rock­et­ing food and fuel costs since be­ing cut off.

The fed­eral law­suit al­leges Den­ver­based Om­ni­trax has failed to re­pair and main­tain the rail line in vi­o­la­tion of a 2008 agree­ment that saw the com­pany re­ceive $18.8 mil­lion in fed­eral aid for main­te­nance and up­grades. The law­suit seeks re­pay­ment of the money.

“The de­fen­dants con­tinue to refuse to re­pair the rail line and re­store its op­er­a­tions, ef­fec­tively leav­ing the re­mote north­ern town of Churchill — and its cit­i­zens — with­out the rail­way ser­vices which they de­pend on to bring es­sen­tial goods and ser­vices to their re­mote com­mu­nity, where no roads go,” the gov­ern­ment’s state­ment of claim reads.

Se­vere flood­ing dam­aged the rail line last spring. Om­ni­trax has said it can­not af­ford the es­ti­mated $43 mil­lion in re­pairs, and has been try­ing to trans­fer own­er­ship of the rail line to a con­sor­tium of north­ern com­mu­ni­ties — a move that would re­quire gov­ern­ment aid.

Prime Min­is­ter Justin Trudeau said in the sum­mer that Om­ni­trax was legally ob­li­gated to fix the line and he would not rule out le­gal ac­tion.

The le­gal pa­pers filed by Om­ni­trax Tues­day are a for­mal no­tice of its in­tent to file a com­plaint un­der NAFTA that al­leges un­fair treat­ment by Ot­tawa.

The no­tice said the fed­eral gov­ern­ment’s de­ci­sion to end the Cana­dian Wheat Board’s mo­nop­oly on western wheat and bar­ley in 2012 dras­ti­cally cut grain ship­ments along the rail line and through the Port of Churchill. It said the open mar­ket al­lowed pro­duc­ers to use south­ern rail lines and Cana­di­anowned ports.

Om­ni­trax’s Cana­dian pres­i­dent, Merv Tweed, was a back­bencher in the Con­ser­va­tive gov­ern­ment that made the de­ci­sion.

“Ar­ti­cle 1102 of the NAFTA re­quires that Canada pro­vide to in­vestors or in­vest­ments of the other NAFTA Par­ties treat­ment that is ’no less favourable’ than it pro­vides to its own,” the 22-page no­tice states. “Through the steps it has taken to un­der­cut the rail line and its mar­ket po­si­tion rel­a­tive to Cana­dian-owned rail­ways, the Gov­ern­ment of Canada has de facto dis­crim­i­nated against Om­ni­trax to the ben­e­fit of its Cana­dian com­peti­tors.”

Om­ni­trax said it hoped to re­solve the standoff am­i­ca­bly, but also said it might file a law­suit for $150 mil­lion if no agree­ment is reached.

Churchill Mayor Mike Spence was op­ti­mistic progress will be made and re­pairs might start in months.

The port of Churchill, Man., on Hud­son’s Bay.

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