Sea Lanes and Strategy

In the summer of 1997, an American businessman by the name of Pat Broe astonished almost everyone by making an investment that seemed pointless at the very least, and one that would probably distract him from other, much more fruitful, opportunities.

His purchase, for the nominal price of just seven dollars, was the port facilities at Churchill, a tiny, windswept outpost on the southwest coast of Hudson Bay, below the Arctic Circle, that almost no one wanted to buy and almost everyone was anxious to avoid. It was home to only around 1,000 people who depended upon hunting, fishing and an influx of tourists who arrive every winter to watch and photograph polar bears. True, it had had its moment of glory during the Second World War, when the Canadian government had made good use of its facilities to ship to Russia thousands of tons of grain that were desperately needed to sustain the war effort. But once the conflict was over, the port had gradually fallen into disuse, having been made virtually redundant by the far more efficient, privately run operations in Thunder Bay and Vancouver. In the post-war years it had become largely forgotten, particularly since it had no roads linking it to the rest of Canada, and was highly dependent on the daily flights made by a number of small passenger aircraft to and from a tiny airstrip a few miles out of town.

For Broe, however, Churchill's saving grace was its railway, which had always been its main link to the outside world. In the mid-1990s, Broe was looking to expand his Denver-based railroad company, OmniTrax, and had already paid vast sums to acquire denationalized lines elsewhere in Canada. He now purchased the port at Churchill from the Canadian government just in case someone else might buy and then use it as a 'toll booth' that might eventually burden his own railroad.1

However, over the next decade or so, it gradually became apparent that Churchill had much more to offer than just old railway track. On the contrary, Broe's decision to invest in the place looked more like a stroke of supreme foresight and entrepreneurial brilliance. This was because, by late summer of 2007, sea ice in Hudson Bay had started to melt more quickly than ever before. Larger areas were navigable for longer summer periods and some experts even began to estimate that the port might eventually be open for 10 months every year instead of the usual 4-month period between July and November. Soon there was wild speculation that it could eventually become a vital part of a trans-Atlantic trade route for international shipping, linking Canada and the United States with Russia and drastically reducing the length of the existing journey. Because of its key coastal location, Churchill would become a commercial hub that lies along the way.

Broe is working hard to bring Churchill up to commercial scratch. Over the past few years OmniTrax has spent around $50 million modernizing the port to accommodate big ships carrying key exports like grain and farm machinery across the Atlantic to northern Russia, and to offload imported Russian products, such as fertilizer and steel, while in October 2007 Prime Minister Stephen Harper also announced the award of a $68 million grant to upgrade the ageing port and railway. Such large investments might eventually reap handsome dividends and one American newspaper even estimated that Mr Broe's nominal initial investment could one day net him about $100 million a year.

In late August 2006, as Pat Broe and his associates were busily rebuilding Churchill's facilities, some native Inupiat residents living near the city of Barrow, a long way to the north-west on the Alaskan coast and the highest point of the North American mainland, were looking along the shores with astonishment. They were stunned to see a large cruise ship, the Bremen, looming in the distance and then pulling into harbour, bringing several hundred German tourists to visit. They had left Europe and headed first of all to Greenland before making their way right through the Northwest Passage, where ice was increasingly on the retreat and in which more ships than ever before had by this time started to move. The lifestyle of some of these indigenous peoples is already starting to change in a number of very noticeable ways - some are even known to have been buying and using air conditioning units in their Arctic homes - but to see a passenger ship pulling into their harbour, even in the relatively ice-free weeks of late summer, was quite unheard of.

Like the Inupiats, almost everyone is amazed by the sheer speed with which the Arctic's ice in the Northwest Passage, and in the wider Arctic region, is melting. But in the case of sea lanes, no less than of oil and gas, speculation and fantasy need to be carefully distinguished from fact.

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