聽 聽 聽 聽 聽 聽 The closure of the Port of Churchill, Man. was shocking, but not unexpected, nor unlikely. Canada鈥檚 sole northern port has limped along, basically, forever.
聽聽聽聽聽聽聽聽聽聽聽 Yet that does not mean it should be closed for good and abandoned.
聽聽聽聽聽聽聽聽聽聽聽 Back in 2013, when the oil boom was in full swing and the price of oil fluctuated between US $110 and US $91 a barrel (mostly in the US $90s, since production was growing everywhere and pipelines were full), crude-by-rail facilities were popping up all over the prairies, and most especially, in North Dakota, where the majority of its oil for a time would find its way to rail.
聽聽聽聽聽聽聽聽聽聽聽 Crude-by-rail, while substantially more expensive, had one major benefit 鈥� it dramatically opened up markets for oil producers. Instead of being limited to just where the limited pipeline network allowed, a shipment could go anywhere the tracks led, meaning almost anywhere on the continent. This meant American Bakken crude started finding its way to places like Saint John, N.B., and the U.S. eastern seaboard refineries, displacing crude from places like Saudi Arabia.
聽聽聽聽聽聽聽聽聽聽聽 Now consider the Port of Churchill, which was sold by the federal government in 1997 to the United States-based company Omnitrax, in combination with the CN rail line leading to Churchill. As is evident with its closure now, Churchill hasn鈥檛 been doing too well since the end of the Canadian Wheat Board monopoly.
聽聽聽聽聽聽聽聽聽聽聽 There were some noises a few years ago out of Churchill that they were looking at shipping oil from the sold Hudson Bay port. The port was initially looking to ship a pilot shipment in late 2013 or, failing that, 2014. They were aiming for 10 tankers per year servicing the port if it should work out.
聽聽聽聽聽聽聽聽聽聽聽 That oil would leave via Hudson Bay, a water body nearly the size of the Gulf of Mexico, then through the Hudson Strait and along the iceberg-strewn Labrador coast to points overseas. 聽聽聽聽聽聽聽聽 Whereas the Gulf of Mexico is teaming with all sorts of traffic, a tanker floating in the middle of Hudson Bay would almost certainly be the only vessel of size in the entire bay. Perhaps one grain bulker might pass by. That鈥檚 it.
聽聽聽聽聽聽聽聽聽聽聽 Churchill is, by far, the closest deep-water port to the phenomenally successful North Dakota oilfields. North Dakota went from 90,000 barrels per day around 2009 to 1.2 million barrels per day by 2015. Quite literally, it鈥檚 all downhill from North Dakota to Churchill, with no mountains to cross. That means loaded trains get the benefit of gravity, and running uphill, the trains are empty. From a rail perspective, it鈥檚 much easier than crossing the Rockies or the Appalachians.
聽聽聽聽聽聽聽聽聽聽聽 Churchill, which was formerly a major military installation during the Cold War, had a substantial 250,000 barrel tank farm, of which 200,000 could be used for exports. Eighty car unit trains would ship approximately 48,000 barrels each to the port for eventual export.
聽聽聽聽聽聽聽聽聽聽聽 Proponents began doing community consultations, and were very quickly shot down. This was in the immediate aftermath of the Lac-M茅gantic tragedy and at the height of the anti-Keystone XL rhetoric. The possibility of an oil spill in the tundra of northern Manitoba, where the tracks ran across muskeg territory, was unnerving. Officials heard a resounding 鈥淣o!鈥� and the plan was killed.
聽聽聽聽聽聽聽聽聽聽聽 While crude-by-rail was a major concern, I pointed out in a column that the vast Hudson Bay and Hudson Strait has essentially no other boats or ships floating in it except for maybe one grain freighter at any one time. There鈥檚 no ability or infrastructure whatsoever to respond to any sort of spill. When the Deepwater Horizon spill occurred, hundreds of boats and ships could be rallied. If something happened in Hudson Bay, there is nothing that could respond except for the two tugs based in Churchill (my stepdad used to be a deckhand on one back in the 1970s).
聽聽聽聽聽聽聽聽聽聽聽 Now the port has closed due to declining grain shipments. Macleans did an exceptionally good story on the port and its history called 鈥淗ow Canada abandoned our only Arctic port,鈥� but it missed the role that crude-by-rail and oil exports could have played. By adding another 10 ships per year, it would have nearly doubled the usage of the port, which shipped principally grain. Obviously that would have made a huge difference in the viability of the port and its associated rail line. Perhaps, if oil exports via Churchill had been allowed, the port would not be closed today.
聽聽聽聽聽聽聽聽聽聽聽 The opportunity may have passed. Crude-by-rail makes economic sense when oil is at US $90 per barrel, but absolutely not when oil was in the US $30s earlier. So even if Churchill was exporting oil, it would not have made economic sense for much of the past year. It might, however, make sense if oil passes US $60 this fall, during the Churchill shipping season.
聽聽聽聽聽聽聽聽聽聽聽 Some people are calling on the federal government to take back the port. It may have to, so we don鈥檛 lose a strategic asset forever. But if it does, for the port to be viable, it will need to handle more than grain. I don鈥檛 know why it never became a potash export point, but maybe that鈥檚 a possibility. It will likely have to export oil, too.聽
聽聽聽聽聽聽聽聽聽聽聽 I wonder if those opposed to oil exports two years ago would have thought otherwise if they realized then that Churchill would be closed today. Perhaps they might reconsider their opposition, if it means Churchill is to survive.
