Ice and Opportunity: Canada’s Northern Trade Route
To begin this week’s podcast, Peter and Jackie recap the past week’s events, including President Trump’s tariff U-turn and the escalating US-China tariff war.
Next, the conversation turns to Canada, the upcoming federal election, and Arctic export ports. To help us understand the opportunities and challenges with Arctic ports, Chris Avery, CEO of the Arctic Gateway Group joins the show. The Arctic Gateway Group is an Indigenous and community-owned transportation company that operates the Port of Churchill—Canada’s only Arctic seaport serviced by rail—and the Hudson Bay Railway, connecting The Pas to Churchill, Manitoba.
Here are some of the questions Peter and Jackie asked Chris: What is the condition of the rail line to the port now? What types of goods are currently exported from the port, and what types are expected to be exported in the future? Is it a deep-water port? How much of the year is Hudson Bay covered by ice, preventing exports? Is it feasible to break the ice? They also discussed whether the port could be suitable for LNG exports.
Content referenced in this podcast:
- Mark Carney, Liberal platform, economic pillars for change with a plan for Arctic ports (note, the Conservative party of Canada also has an Arctic control and sovereignty plan, but it does not explicitly identify energy export ports).
- Energy News “Arctic Pipelines to Capture European Market” (March 26, 2025), reporting that Canadian Prime Minister Mark Carney’s initiative aimed at expanding the country’s oil infrastructure toward the Arctic
- LNG Industry, “Ice-breaking LNG carrier for Yamal LNG project named Vladimir Rusanov” (January 2018)
- Ship Technology “Mikhail Ulyanov Ice-Class Tanker” (December 2008)
- The BC Government announces more flexibility for the LNG net-zero 2030 policy, see March 28, 2025 letter to project proponent and updated Climate Action Secretariat’s Net Zero Plan Requirements
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Episode 280 transcript
Disclosure:
The information and opinions presented in this ARC Energy Ideas podcast are provided for informational purposes only and are subject to the disclaimer link in the show notes.
Announcer:
This is the ARC Energy Ideas podcast, with Peter Tertzakian and Jackie Forrest, exploring trends that influence the energy business.
Jackie Forrest:
Welcome to the Arc Energy Ideas podcast. I’m Jackie Forrest.
Peter Tertzakian:
And I’m Peter Tertzakian. Welcome back. Well, Jackie, is there any sense of stability out there?
Jackie Forrest:
No. Here it is, we have to timestamp still. Monday, April 14th, eight o’clock in the morning. And Peter, you called it correctly last week, you said the White House would U-turn on these tariffs and not all of it, but a big part were paused. We’ve got for non-China 10% tariff now, but of course for China, we saw a big escalation, kind of crazy. I think we’re at 145% tariff on most things coming in from China now. Of course, the president, there was news all the weekend that electronics would be excluded, but still I think massive.
Peter Tertzakian:
Well, even there was a capitulation on that one, like, maybe. They said, first of all, as if it was going to be open-ended, no tariffs on electronics. But then by Sunday morning, and then the talk shows it was rescinded in a sense that it was, well, it’s not forever, we’ll see.
Jackie Forrest:
Yes.
Peter Tertzakian:
It’s almost the statistical theories around if things become so unpredictable, they become predictable in a statistical sense. And so this is just, the unpredictability is predictable here, and so there’s going to be more toing and froing and capitulation. And I keyed in on that word stability, because a lot of people talk about volatility and for sure things are exceedingly volatile. And for those that follow, for example, the VIX or the Volatility Index, it’s just absolutely through the roof in the equity markets.
And so, I mean, it’s going to be volatile, there’s no question, but it can be stable and volatile such that you can quantify the volatility and get a sense of the uncertainty. I don’t believe we’re there yet. Our question is, what is the new norm for volatility? And I think at that point there’ll be some sense of at least stability in the financial markets, but for now, it’s going to be trying to predict or trying to get predictability in an unpredictable world. Stay tuned. We’ll see what happens with the standoff between China and the United States. What is the total tariffs now? It’s some ridiculous number-
Jackie Forrest:
It’s 145%, on goods coming from China into the U.S. and I think it’s about 125% the other direction. But I did want to just talk about the magnitude of this. This is from a Guardian report, and I’ll put a link to that in the show notes, but it was basically saying that, we’ll talk about these electronics. 90% of Apple iPhones are assembled in China. That’s what analysts estimate. The company has never really put out the actual number.
If a smartphone was 1200 U.S. dollars before, it’s now they’re estimating over $2,000. Now, maybe not everything’s falling under the 145% in that calculation. And in the same article, an analyst estimated if that same smartphone were to be made in the U.S., it would cost $3,000. This is going to really, to me, damage the U.S. economy, and maybe that’s why they u-turned on the electronics. But I was just listening to an article this morning on the New York Times where it was like, baby goods and they were saying the same thing, that it would cost three times more to produce this in the United States, if they could even do it. Because they don’t have the equipment or the expertise.
Peter Tertzakian:
Well, when you think about 145% tariff, we’re getting to the point of it being, it’s going to affect supply chains. But if you think about tariff, what is a tariff? A tariff is a mild sanction. If you think about sanctions such as they are on North Korea, Russia, Iran, and countries like that, a sanction is effectively an infinite tariff. In other words, there is no price at which you can buy this. But when you get sort of like 145… Well, let’s back up. I mean 10%, okay, that’s a mild tax, we’ll call it. 25%, all right, that’s starting to bite, but 145%, you’re basically getting into the territory that’s almost like a full sanction. We are not going to buy your goods because it’s just so expensive. We have to go somewhere else.
But, guess what? You can’t go somewhere else right away for whatever it is, inputs into baby clothes or what have you. It effectively is potentially going to affect supply chains again, certainly in the United States.
Jackie Forrest:
Well, and let’s talk about energy. This is really impacting clean energy. The U.S. imports a large amount of the lithium ion batteries, for the electric cars, for the grid equipment, from China. And there’s a whole series of things, even the stuff that’s manufactured in the U.S. for clean energy, many of the component parts are coming from China. This is going to massively increase the cost of clean energy. It’s interesting, when this all started and Trump came into power, there was a lot of concern around the Inflation Reduction Act and if that would go away and how that would affect clean energy. I don’t think anyone saw that the cost for this equipment could go up multiples and really hurt the economics of these projects.
Peter Tertzakian:
We’re not going to see this probably for a couple months because there’s still inventories. But once the inventories are depleted and people have to buy new to replace the inventories, that’s when I think you’re going to see it. And so, whether or not there’s going to be some further lessening of tariffs in during this 90-day period, I think they’re trying to do 90 deals with 90 countries in 90 days, which is, one a day. Whereas most tariff or trade negotiations, you’re lucky if they’re done in 18 months. I think that you’re going to see something or the manifestation of all of this stuff, the consequences of all of this stuff, by the end of the second quarter, it’s going to show up in the numbers and for sure the third. Unless there’s some soon a full lift or maybe back down to 10% lift of the tariffs, bring them back down to 10% or something.
Jackie Forrest:
This is the problem though, it’s hard for business people to make any plans right now. They’re just sitting there like, “Well, why should I take action? Because it could change tomorrow.” I did want to say, Canadians may think they’re being spared right now, but, for instance, I bought this small cabinet on the internet this weekend. It was from China, and it was like $400. And I’m thinking, “God, for an American right now, this would be like $700.” And like you say, I probably wouldn’t buy it. But I’m really concerned that when the Americans come to our trade negotiation, which I think there’s a better chance… I feel more optimistic that we will get a trade deal with the Americans. That we are probably going to have to adopt whatever they have on other countries.
And we saw that with the electric cars. Do you remember the electric cars last fall? The Americans put 100% tariff on Chinese electric cars, we were asked to do the same. I don’t think Canadian businesses can just sit here and think they don’t have a problem. I think there is a risk that we may see whatever tariffs on China and other countries applied to us as well.
Peter Tertzakian:
Well, I think the message is there’s many chapters to be written in this story yet, and how it’s going to affect Canada is yet to be seen. And I agree with you, the story is far from over.
Jackie Forrest:
I did want to talk about one other chapter is, I don’t know if you noticed the sell off in the U.S. bond market last week, and a lot of people… We had the sell off in the overall equity market. But usually when equity markets go down in times like this, the bond market actually does well because people see that as a safe haven, especially U.S. treasuries.
But we actually had a situation where, there weren’t a lot of people buying U.S. treasuries. The interest rates were really having to go up to attract people. And a lot of people say this is one of the catalysts is why the Trump administration put the pause on. This is an example to me of an unintended consequence. There’s a lot of things that could come out of this that we can’t even predict today. But here, we’re not going to buy U.S., well, maybe people aren’t going to buy U.S. debt either. And Japan and China are some of the biggest holders of U.S. debt. If they decide, I’m not buying U.S. debt anymore, that could have broader implications for the financial markets that come out of this. So, something to watch.
Peter Tertzakian:
Well, it certainly will have an effect on you as a vacationer, if you’re planning to go to Europe this summer. A lot of the traders have been, you’re right, selling their U.S. bonds and buying European ones. You can see that in the currency movements. The Swiss Franc is way up, the Euro is way up even the Pound. And so it’s going to cost you a lot more on that vacation. And in large part, that’s because of these shifts in the global financial markets and the, again, lack of stability in what’s going on here.
Jackie Forrest:
Well, and then the negative implications could be quite broad for the U.S. economy as a whole, right? Because they have benefited from the fact that, in all sorts of circumstances, people see them as a safe place to put their money.
Peter Tertzakian:
Well, there was the old adage for years when the U.S. sneezes, Canada catches a cold. When the U.S. catches a cold, we’ll see what happens to Canada and the rest of the world. Speaking of Canada, let’s bring it home here and talk about the chapters being written in our federal election.
Jackie Forrest:
And well, I wanted to talk about one of the platforms that the liberal party has, and if you go to their website, we will put a link under the Mark Carney website. He has put out a platform which he talks about his economic pillars for change. And one of them is working closely with indigenous leadership, to fortify our Arctic against enemies and strengthen our year-round land, air, and sea presence. And he also talks about wanting to have infrastructure such as deep water ports and runways. And he has told the media that he wants Arctic ports that will create direct access to Europe and Asian markets, including oil pipelines.
Peter, we had talked a little bit about this last week. You had said, “Well, other countries do it, so why shouldn’t we?” And I did do some research on this. Mainly it’s the Russians that are doing this kind of thing, but Yamal LNG project, does have special-made LNG ships that are icebreakers, so they don’t need a separate icebreaker. And according to their article I found, and I’ll put a link to it, they can break up to two meters of ice. And in that area they have ice covering seven to eight months. I don’t know. It’s obviously more expensive than shipping out of other places, but they are doing it.
And they also have crude carriers that can break up to one and a half meters of ice, without an escort vessel. However, they’re not like the very large crude carriers, but they do have crude carriers that are operating in their north. It does happen. And so I thought we should learn a little bit more about our potential for Arctic ports.
Peter Tertzakian:
Well, I think we should. Because the Russians have been doing this for a long time, so why can’t we or can we? And now that the discussion is open about building infrastructure to the north, who better to help us through understanding it than Chris Avery, CEO at the Arctic Gateway Group at the Port of Churchill? Welcome, Chris.
Chris Avery:
Oh, thank you for having me. Thank you, Peter. Thank you, Jackie.
Jackie Forrest:
Good. Well, maybe tell us a little bit about yourself and the Arctic Gateway Group, because I’m sure a lot of our listeners maybe aren’t so familiar.
Chris Avery:
Yeah, sure. Let me give you some background on the Arctic Gateway Group. First of all, the Arctic Gateway Group owns and operates The Port of Churchill, The Hudson Bay Railway, and The Churchill Marine Tank Farm. We are owned by a consortium named One North, which is a consortium of 41 First Nations, Northern Manitoba, First Nations, and the communities that we operate through. Largely Indigenous-owned organization. What we’ve talked about way before Trump was elected president was, we were about building trade-enabling infrastructure that allowed the vast resources in Western Canada, access to global markets through the Port of Churchill. And primarily those global markets are European markets, African, Middle East, even South America market. I.e, non-U.S. markets.
Peter Tertzakian:
I’ve been to the Port of Churchill, and if you haven’t done that as a Canadian, you should put it on your bucket list because that’s where the polar bears start waking up in the last few weeks of September, first few weeks of October.
Chris Avery:
That’s right.
Peter Tertzakian:
And you can go up there. It is just amazing. It’s honestly a life-changing. It was life-changing for me to see the Hudson’s Bay as it was freezing up and see the polar bears so highly recommended. But we had to fly there. There’s no roads. There’s a railway, which we’ll talk about. What is the access to the Port of Churchill? Is everything by air and summer barge or how does it work?
Chris Avery:
The access to the Port of Churchill is by rail. The Hudson Bay Railway runs from The Pas up to Churchill, and in The Pas it connects to the Class One Railways Network, particularly to CN and The Pas. It’s really connected to all of North America. And then from The Pas up to Churchill, it’s connected with the Hudson Bay Railway.
Peter Tertzakian:
The Pas, Manitoba?
Chris Avery:
That’s correct.
Peter Tertzakian:
And so there has to be some fork that goes north from the main, is it the CN line?
Chris Avery:
Yeah, it connects from the CN line to the Hudson Bay Railway and from the Hudson Bay Railway, we go north up to Churchill.
Peter Tertzakian:
Some people say that that railway is unable to handle large volumes of cargo or large tonnage.
Jackie Forrest:
I think there’s a concern. And just for history, there was a flood and it was out of commission from 2017, so maybe tell us a bit about that. But there’s also a concern that it’s built over a bog, so there’s limits in terms of the weight it can carry. I don’t know if that’s true or not.
Chris Avery:
Absolutely. Well, as with anything, what I’m learning about the Hudson Bay Railway and the Port of Churchill, there’s a lot of history. And the railway and the port has been operating for almost 100 years. And for much of its history, it was originally owned by CN, and then it was sold to American interest, and then now it’s owned by Arctic Gateway Group. Long history of trade through the Port of Churchill, including traffic of grain and agricultural products through the railway up to the port. There’s a long history and a long love of example of trade going through the Port of Churchill.
Peter Tertzakian:
The original trade was the fur trade with the Hudson’s Bay Company, which unfortunately now is in demise and a loss of some Canadiana for sure.
Chris Avery:
Absolutely. And then, after that, the access of providing markets for the vast grain, we have agricultural products we have in Canada. In 2017, the railway washed out and it was a significant weather event for sure. It was in the springtime, and the northern part of the railway washed out. It was largely because the infrastructure was neglected for decades, ironically, by American interests. At that time when the railway washed out, it stranded all the communities in Northern Manitoba cut off all any trade that went through the Port of Churchill, and in fact cut off some of the supply routes to Central Nunavut to the Kivalliq Region, where traditionally Manitoba has supplied.
It was a service stalemate for 18 months where the American company held Canada hostage somewhat, refusing to repair the railway. That’s when Arctic Gateway Group was formed to take over the ownership of the railway and the port, in partnership with the Government of Canada. That’s kind of the history.
Jackie Forrest:
And you’ve since done a lot of work to improve the railway. Is it better now than it was before the flood?
Chris Avery:
Yeah. We’ve invested significant capital into the railway, and it’s probably in better condition than it has been for almost 30 years now. It’s in great condition. And maybe to answer your question about the bog and really essentially permafrost, I would say, maybe half of Canada’s geography is in permafrost regions. And so, as a result, a lot of our linear infrastructure has to go through permafrost at some point or another. We have great people and great academia and scientists and industry in Canada, who work through permafrost, whether it’s for railways, highways, pipelines, and whatnot. What I would say is, we have great technology in this country that help us manage permafrost that we maybe didn’t have 30 years ago and maybe even didn’t have five years ago. Things like anticipating the different types of impact of permafrost to the railway and addressing it properly, whether it’s with things like thermosiphons, which help keep the ground cold, to simple things like culverts to help the water flow when ice melts, so that you can properly maintain the railway, to really frankly letting the permafrost melt and putting proper foundation down.
We’ve put down some 350,000 railway ties. Any of your listeners have done gardening work, you know how heavy those are. We’ve moved 350,000 of those. Half a million tons of ballast rock, which is, really solid rock foundation that allow water to flow through. All that to say, we have a great foundation for the railway. And then on top of that, go on a little bit. But on top of that, we have great technology to help us monitor the railway, and see what’s happening to the railway before it actually happens. We have things like, ground penetrating radars that are mounted onto our locomotives that’s taking real time data of what’s happening in the ground. We have drones flying overhead of our railway, because we have a shorter railway, we can do that. That’s measuring the geometries of the track and the levelness of the track. And looking at the lands around the tracks because the lands, culverts and beaver dams and so on, are important part of maintaining a railway.
And then we have things like computing power and AI to help us analyze what’s happening. Because in the past, someone would’ve had to look through all that footage of the drone footage or siphon through all that data. Now with GPS, AI can help us identify where the issues will be, predict where the issues will be, and then GPS will tell us exactly where that’s happening.
Peter Tertzakian:
So for preventative maintenance and ensuring that the thing is reliable throughout the year, 365 days a year. Talk about the railway access as a right of way. Is the Hudson’s Bay Railway typically there’s a wide swath carved out for the railway? Is it possible to bring other utilities including pipelines and things along this right-of-way?
Chris Avery:
Yeah, we definitely have a right-of-way all the way up to Churchill. The details around whether there’s exactly enough room for pipelines or certain pipelines, I wouldn’t say we’ve looked at it in detail.
Peter Tertzakian:
I mean, we talk to people here in the lower latitudes, I’ll call them, who basically say, “Ah, Churchill, the railways decrepit and there’s a bog and way too expensive and so on.” But what I’m hearing you say is that, that may be opinions that have been formed based on the condition of the railway, maybe even half a dozen to 10 years ago. That it’s now it’s in a different state.
Chris Avery:
One of my colleagues who’s been involved on the Churchill file for many years always tells me that we have a reputational deficit. And the railway has this history of being washed out at some points and other issues, but really, the railway is in better condition than it’s ever been. And we focused on that because we knew you need to connect the port to the railway to the southern parts of the country first, and now we’re turning our attention to the port.
Jackie Forrest:
Now it’s interesting. I think we’d have this issue anywhere we did an Arctic port. Rail is the most efficient way to get things to ports, maybe pipelines for oil and gas, but we have permafrost in our north, so we have to find a way to manage these problems. It’s not just unique to this location, is it?
Chris Avery:
No, it’s not. And in fact, we have academia working on it, and we have great partnerships with academia. And that academia ranges from University of Calgary right here, where we’re doing the podcast, to Laval, to Royal Military College. We have great people and great minds working on this and permafrost is not new to Canada.
Peter Tertzakian:
There’s a lot of talk about energy corridors, certainly it’s one of the platforms of the CPC to create energy corridors across the country. Does that come up in terms of a corridor to Churchill or is the corridor the Hudson’s Bay Railway right-of-way?
Chris Avery:
Jackie, you were asking about this. We were talking about building this infrastructure for a long time before Trump was even elected president. And we had it as a view because with the washout, essentially all trades through Churchill came to a halt. We think of ourselves like a startup, because building back up the business completely from almost nothing. And so we’ve been focused on things like critical minerals. We took 10,000 tons of critical minerals, zinc concentrate, that was mined in Manitoba, transported up on the Hudson Bay Railway, and then exported from Churchill to Europe last summer. We’ve been focused on things that we know we can do today. So bulk handling of critical minerals.
In fact, we are increasing the amount of critical minerals to be exported this year, this coming season, doubling that. And then we’re tripling our capacity to handle critical minerals and doing a number of other things. These are things we can do right now. And then we had in the long-term, we focus on the short-term and get the port running and the railway running and trading, the conversations around, energy products would come in the long-term. And whether that’s hydrogen to LNG, to oil and gas, we thought those conversations would be more longer term. And certainly the recent events have pulled forward a lot of those conversations that we weren’t anticipating having for maybe at least five years.
Jackie Forrest:
Do you have grain? I know historically there’s been a lot of grain going out of the port. Is that the case today?
Chris Avery:
No, we’re working on that now. We expect to have grain and agricultural products going through the port this coming season. And then we’re really, even within the agricultural industry, diversifying into different types of products. We signed an agreement with a company called Genesis Fertilizer recently, which is planning to build a $2.3 billion fertilizer plant outside of Regina. The Hudson Bay Railway and the Port of Churchill is an ideal routing for it to potentially export fertilizers to global markets, to European markets.
And the other thing that they need as a feed product for farmers in Western Canada, is phosphates. And phosphates traditionally come from Southeast part of the U.S., so we know what’s happening in the U.S., right? Another source of phosphate is from Northern Africa or the Middle East. Churchill becomes a perfect import route for this product coming from Middle East and Africa, through Churchill, and then down on the Hudson Bay Railway to Western farmers.
Peter Tertzakian:
We’ve talked about the railway and getting to and from Churchill on land. Let’s talk about getting to and from Churchill by sea or the Hudson’s Bay. I looked it up and Churchill is at a 58 degree latitude, which is actually below the Alberta Northwest Territory, the North of 60 line. And Yamal, which Jackie mentioned in Russia, is actually at 70 degrees, so it’s considerably further south. But you have to go up and around Northern Quebec as you transit out of Churchill, so there’s a considerable ice pack. How many months of the year is this route ice free? Let’s talk about the logistics of getting in and out.
Chris Avery:
No, that’s a great question, Peter. Currently, our shipping season is four months of the year from July to October. And we partner with University of Manitoba and Dr. Wei Feng, who is one of the preeminent sea ice researchers in Canada. And with his group. In fact, the Churchill Marine Observatory is our neighbor up in Churchill. We partner with him and what he tells us his data shows is that, the sea routes could actually be open for six months of the year. But really what’s stopping that happening right now is really the insurance industry. We’re working with the University of Manitoba to gather the data so that we can provide this to the insurance companies, who are working with decade old data. Once they have this data from an objective point of view, we can then potentially open up the sea lanes for even up to six months of the year, because really the premiums really skyrocket after October.
Jackie Forrest:
This is with breaking of ice though?
Chris Avery:
Nope. This is just the way it is just today, without any ice breaking.
Jackie Forrest:
That’s because they would just charge you more for insurance for the risk of icebergs and things like that?
Chris Avery:
Yeah. And because their data is from decades ago. We essentially need to provide them up-to-date data, from a reputable source, which the University of Manitoba is. We’re working on this study today, and we should have that completed by the end of the year.
Jackie Forrest:
Now in those Russian examples, they built special ships so they don’t need a special ice breaking ship out front that could do up to one and a half to two meters of ice breaking independently. How thick in the coldest part of winter is the ice that you’d have to transit?
Chris Avery:
For the sea lanes, and this is from the University of Manitoba, for the sea lanes that we operate through, the ice is single season ice, so it’s only for one season and it’s less than two meters. It’s about one and a half meters.
Jackie Forrest:
It would be more expensive to build special ships that ice break. I was actually reading about the Yamal, sometimes their capacity is limited because they only have so many ships. And apparently during that peak ice period, they go much slower. The amount of ships you have aren’t moving as much, but it is possible based on the Russians that you could break ice and move things, commodities like oil and gas. And I imagine other commodities with other specially built ships. Of course, that would be more expensive though than just moving out of an ice-free port.
Chris Avery:
Absolutely. But the study that the University of Manitoba has done is, their trends in the data shows that the sea lanes can be open for one additional extra day for every year that goes by, and that’s based on the past 40 years of data. From their projections, if nothing else changes, if current climate change conditions continue, they estimate that within the generation of our kids or our grandkids, that the sea lanes could be open 365 days a year. We need to start preparing for that, because that’s not very long.
Jackie Forrest:
Is that like 40 years away?
Chris Avery:
40 to 60 years away.
Jackie Forrest:
Right.
Peter Tertzakian:
Well, here in the now though, there’s another advantage to this and that is the northern latitude because, if we start talking about destinations for the goods, this is a polar type route. And if you look at a globe from the top down, you can see that the transit distance from Churchill to Europe and certainly Northern Europe is actually not that far.
Chris Avery:
That’s correct. We estimate it saves up to two to three shipping days of time.
Peter Tertzakian:
So when it’s slower, it’s still faster in a sense than going other traditional routes that are closer at lower latitude.
Jackie Forrest:
Another opportunity I guess would be, we’ve been talking about Canada’s lack of energy security. You could imagine we had the CEO of TC Energy, Francois Poirier, come on the podcast and he talked about how building a pipeline all the way to Eastern Canada would be very expensive. I guess another option for energy security would be to go here to Hudson Bay and then you could bring the products back around to Eastern Canada.
Chris Avery:
Sure.
Jackie Forrest:
That would be an energy security benefit of it, even if it would be maybe more expensive than going through the U.S. today, it would provide us sovereignty over our energy flows, right?
Chris Avery:
Sure.
Peter Tertzakian:
You could do that and you can also rail the oil if you had to. There’s all sorts of intermodalities and things, and once you have a port, you can start thinking about all the possibilities.
Jackie Forrest:
How deep is the port? Could it take the very large crude carriers that can carry 2 million barrels a day? Or is it equivalent to some of the ports in the world with the deepest water, or does it have some limitations that way?
Chris Avery:
In the past, we’ve had a Panama size vessel in the port, but that’s the more common size, it’s more of a handy max, it’s more the common size. The very large vessel that you’re talking about, it’s not been something that we’ve looked at. But I would say that’s as those opportunities come up, those are the things that we’re going to study. Right now we’re focused on fixing up the port that’s been neglected for decades, whether it’s the wharf face or the wharf deck, but we are also doing some planning for the future. This past season we’ve done drilling in the harbor to better understand the current conditions of the ground at the bottom of the Harbor with the aim that we then understand how much dredging we can do and how much depth we can create for vessels. As the opportunities come up, we’re ready to have those discussions, but right now there’s no need for it. We haven’t started our dredging program yet, but that is in our plans.
Peter Tertzakian:
Well, whether it’s dredging or building other infrastructure and just growing Churchill as a port, it all speaks to increased need of people and labor. Can you just talk about the labor situation? And, I mean, as I said, I’ve been up there, albeit I think it was a dozen years ago, and it’s a pretty small town, and now we’re talking about major expansion in an outpost of Canada, not as far out as some parts of the north. But, I mean, it’s not an easy place to get to.
Chris Avery:
No, that’s a good question. First off, the Town of Churchill is maybe a population of around 800 people, and the infrastructure in Churchill can support up to about 5,000 people. There’s great infrastructure already in Churchill, so we aren’t needing to build that up. From our ownership perspective, maybe I’ll pivot to our ownership perspective. One of the questions I get asked from our indigenous leaders who are owners and partners in the Arctic Gateway Group is, as we’re making these investments into capital infrastructure, and as we’re building up business, the number one question that I get asked is, how many jobs are you creating in the communities and how many indigenous and non-indigenous jobs are you creating for local rather than bring people to the region?
I think there’s a huge demand and a huge need for good jobs and good opportunities in the north. I think we’re ready for that, it’s a matter of providing the opportunities. And to be fair, I don’t think a lot of those opportunities have been available in the past. I think this is a great opportunity. I think our Premier Wab Kinew in Manitoba talks about the economic engine pulls the social cart, and so he recognizes that, as we’re building up this trade in infrastructure, that helped create economic and job opportunities for people.
Jackie Forrest:
Well, and I think another broader benefit… I want to talk a little bit maybe Peter, about my views on oil and gas shipments out of the port considering these constraints of the ice time. But I think another benefit to Canada, which is hard to quantify, but it’s just having more people in the north, having more sovereignty over our north, that’s a big push right now. And so that would be a benefit to the country that comes from this port. It certainly is going to be more expensive shipping out of a place with that much ice than other ports that we have in this country, but I think it would benefit our sovereignty over the north as well and our security of our country.
Peter Tertzakian:
This is a multi-generational project. If you start running numbers in a spreadsheet, if it’s a 20-year payback or 10-year payback, forget it. This is a multi-generational thing for the country, for the north, for our sovereignty. I think it’s a great thing.
Jackie Forrest:
But here’s the problem. If you’re a private company that needs to ship your product, why would you pay a lot more to go through this port? Because, now you have ice breaking, now you have seasonality, you have a special railway that has to deal with permafrost. This is going to be more expensive than just out of the Port of Halifax or Montreal or Vancouver. The private company isn’t going to be motivated to pay more for their transportation.
Peter Tertzakian:
I’m not convinced, and I have not run a numbers or anything, I’m just thinking gut feel here. But once you get the infrastructure built and you get economies of scale and you start getting transit on a more routine basis, there are distinct advantages to these northern polar routes, distance being one of them as Chris said, it’s a three-day advantage to Europe. I’m not convinced.
And then as I said, if you amortize this over say, 60 years or 50 years, like a multi-generational project, I think that we’ve got to think longer term in this country. If you think about how China thinks and other countries with a long-term vision, they don’t think in terms of 20 years, and, yeah, it might be more expensive to do this, they just think really strategically. And that’s what we need to do in this country. We need to think strategically about things. It’s not all about whether it costs 25 cents more or whatever. Maybe it is 25 cents more, but arguably it’s 25% less if we really put our minds to it.
Jackie Forrest:
Well, I’d argue it’s probably more than 25 cents. But here’s the thing, let’s talk about Russia. They are doing it, right? But that’s a national oil company that maybe okay with taking a higher cost transportation route because they see broader benefits for this project to the country. We don’t have companies that think that way, we have companies that need to maximize return for their shareholders. And going through a route that doesn’t have the best return is not something they’re going to want to do.
Chris Avery:
Well, maybe I could talk about what we tell the companies because, certainly when the sea lanes are open, we actually feel that we’re very competitive price-wise because of the shortened length of transport and lower cost structure. Not having to be out at sea for as long as they do going through the St. Lawrence River and going through the canals and so on. We talk about that and then we talk about the opportunities in the future as the sea lanes become open for even longer.
But the other thing we talk about is also optionality because, certainly with the U.S. trade wars today, where everyone’s looking for infrastructure to go to access other markets, and Churchill provides that. And in my mind, if it’s not the U.S. today, it’s going to be China or Asia tomorrow. For a country the size of Canada, to have a Northern Seaport option, to me, just makes sense.
And then aside from the trade piece, it wasn’t too long ago in 2021 that the Ports of Vancouver were all washed out. Access was cut off because the railways and the highways were washed out. And you can imagine, I don’t know if someone has done the math, but the impact on the Canadian economy was great because the port was completely cut off. Again, optionality I think is super important. And Churchill will never replace the Port of Vancouver or Montreal, but it’ll be an option for exports and imports for when things happen. And we’ve seen more weather events and more volatility and weather and forest fires and even labor disputes.
Peter Tertzakian:
Well, you look at the distance, getting back to the distance thing, you look at the distance from Alberta, let’s just call it Calgary to Europe, there’s a reason why when you fly to London, you go over the Hudson’s Bay. It’s because it’s shorter. Going from Calgary to Churchill, I think we even fly over Churchill to go to Europe, it’s just a far more direct route.
Jackie Forrest:
I agree with that when the ice lanes are open, but when they’re not, it’s very expensive. I put some thought into the LNG idea. I thought, okay, could we do LNG out of this port? And I had to think about it from a competitive perspective. Now the Russians are doing it, yes, but it’s a national oil company, so maybe not looking at all of the things the way a private company would. If you’re going to do a facility the size of an LNG terminal, these are like tens of billions of dollars, you need to be running 365 days a year to get a return on that investment, right? There’s no just four month a year option.
When we think about deliver to Europe, who are we competing against? U.S. Gulf Coast and the Middle East. Those are the two main suppliers in U.S. Gulf Coast, they can build those facilities cheaper than us already, because they’re sitting there on the massive Gulf Coast, they bring in the big modules. Tried building an LNG facility in this remote north, it’s going to cost more. On top of that, we’re going to have to build these special ships that maybe go slower in the winter, in order to ice break. And then our other competition is the Middle East where they build stuff cheap and they don’t have any of these issues. I just have a really hard time seeing how we can compete with our competitors.
I do think, too, the other issue is, I don’t think we can access the West Coast here. And the West Coast really is our best market for LNG because we’re pointed towards Asia. And Asia is where I think the growth in natural gas will be.
Peter Tertzakian:
Well, this is good debate. I think that we have substantial advantages if we just put our minds to it, think differently and think bigger. As a northern latitude, there’s substantial advantages for LNG in terms of the efficiency of liquefaction. Gulf Coast, Middle East, I mean you’re talking about 45 degrees C plus 45 here in Churchill, it can go down to minus 40. It’s just a different thing.
And again, I’ll just come back to the Russians. I mean, Yamal is at 70 degrees north in the middle of absolute nowhere, the northern part of Siberia, and they’re doing it. Why is it that Canada with equal resources and ingenuity arguably can’t do it? It’s just a matter of how long-term we think about this thing and how things… I’m going to be the number one salesman.
Jackie Forrest:
Peter, we’re going to disagree on this one. But I do agree if we had a national oil company or maybe some government funding or maybe some government regulation that forced companies to do it, I wanted to make one side note on totally different topic around LNG. Don’t know if you noticed, it was a quiet release talking about our West Coast LNG opportunity. But on March 21st, the B.C. Government posted an update to their policy on net-zero LNG. They’re now saying that you don’t need to be net-zero LNG by 2030, if you can’t get the electricity. And it’s not reasonably possible to do it. And the proponent has tried to get the electricity, but it’s not going to be there. And you don’t have to be net-zero until you can get the electricity. Side point, that just makes our LNG I think, that’s been a big barrier to building on our West Coast. So that is a really helpful change in policy for the B.C. Government. I will put a link to that in the show notes as well.
Chris Avery:
Jackie, Peter, could I maybe add couple more things just quickly on LNG in particular?
Peter Tertzakian:
Sure.
Chris Avery:
And like you said, Peter, it’s all in the math and we need to work through this and certainly we don’t have all the details around it. But I would say some of the things that are helpful for Churchill is clean energy. Manitoba has lots of hydroelectricity and lots of opportunities for clean hydroelectricity. So that’s a tailwind. And then the other thing is Churchill is a cold weather location. While the cold causes some problems, my understanding it also helps with the LNG liquefaction.
Peter Tertzakian:
Absolutely.
Chris Avery:
There are some things, again, as you said, it’s all in the numbers and someone has to do the math to see if it works.
Jackie Forrest:
Right.
Chris Avery:
The other thing is you mentioned sovereignty, northern sovereignty. Churchill with the railway connecting the port to the rest of North America, so rail is the most efficient logistical way to move goods. And then the Port in Churchill. And then we also have a 9,200-foot runway in Churchill at the airport there, that’s capable of handling any transport aircraft or passenger aircraft in the world. And then the town infrastructure. It’s a great set of infrastructure to help us assert our sovereignty in the north. And it can be a great supply base for all those northern bases and military bases that we need to have for our defenses. All that adds to the infrastructure and adds to the scale as we’ve talked-
Peter Tertzakian:
Well, and it adds to the argument that it’s not all about dollars and cents. I mean, there’s bigger things that play in the world today as we know, and we have to start thinking strategically for future generations of this country.
Jackie Forrest:
And today does the Port of Churchill supply a lot of those northern communities?
Chris Avery:
Yeah. Particularly the Central Kivalliq Region. We actually have a great relationship in an MOU with the Kivalliq Inuit Association and their Economic Development Arm, SACU, to talk about how we can really leverage the opportunities between Churchill, Northern Manitoba and the Kivalliq Region.
Peter Tertzakian:
Well, this has been a wonderful conversation. Thank you, Chris Avery. You’re the CEO at the Arctic Gateway Group at the Port of Churchill. Again, I encourage those who have not been to Churchill, to go to Churchill. Particularly, I think I said late September or early October, I think it’s late October, early November.
Chris Avery:
That’s correct.
Peter Tertzakian:
And I mean, it is a uniquely Canadian experience to see the Hudson’s Bay and the polar bears. But also in future, to see a hub of economic activity that I think, is essential to so many dimensions of Canada’s future prosperity and for the people of the North. Thanks so much for joining us.
Chris Avery:
Thank you for having me.
Jackie Forrest:
Thank you, Chris. And thanks to our listeners. If you enjoyed this podcast, please rate us on the app that you listen to and tell someone else about us.
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