Communities along the flood-damaged railway to Churchill have renewed hope after it was announced a Toronto-based investment company will partner with two Manitoba groups in an effort to buy Omnitrax's assets.

"Oh I'd love to see that," said Dale Demeulles, who owns a hardware and lumber store in Churchill.

Spring flooding washed out a section of the railway earlier this year and the federal government and Denver-based Omnitrax have been locked in a battle over who should fix it. The railway is the only land transportation into Churchill, 1,000 kilometres north of Winnipeg on the shore of Hudson Bay.

​The rail outage has had a significant impact on Demeulles's business. He's lost customers in Nunavut, who are now getting their supplies from Montreal, and couldn't do business with his Winnipeg suppliers.

"I have no staff right now, it's just me and my wife because it's so dead," he said.

"On a regular season, we ship to the northern communities, about 300 crates of product, this year we maxed seven — that's how much percentage of the business we've lost."

Two groups representing northern communities and First Nations — Missinippi Rail LP and One North — have been trying to purchase the Hudson Bay Railway and Port of Churchill from Omnitrax. Now, Fairfax Financial Holdings is joining them.

"Fairfax is a very reputable company. They bring forward various levels of expertise on different aspects of running the railway," said Assembly of Manitoba Chiefs Grand Chief Arlen Dumas.

He helped start the Missinippi Rail consortium when he was chief of Mathias Colomb Cree Nation. The consortium has been trying to buy the railway for two years.

Missinippi has a partnership with another First Nations-owned company, Keewatin Railway Co., which purchased the section of railway between The Pas and Lynn Lake from Omnitrax more than a decade ago.

Arlen Dumas

Assembly of Manitoba Chiefs Grand Chief Arlen Dumas says he's pleased to have partner with two Manitoba groups in an effort to buy Omnitrax’s assets in Manitoba. (CBC)

"There's a lot of opportunity. As I said from the beginning, we need to make a sustainable business decision and our philosophy needs to be about how we provide for ourselves in the north," Dumas said.

Hard times for northern residents

The mayor of The Pas, which is the starting point of the Hudson Bay Railway, hadn't heard about Fairfax's involvement when CBC called but was excited to hear about it.

Without the railway, residents of Churchill have had to fly in supplies, driving up the cost of food and fuel.

"It's been horribly difficult because people are suffering," said Mayor Jim Scott. "They're paying enormous prices up in Churchill for product. In other communities along the bay line, they can't even get product in."

While the partnership between Fairfax and the Manitoba groups is good news, he worries it will take some time for the railway to resume.

"It's difficult to repair the railroad in the middle of winter, and winter has arrived so that is a factor."

Flooded Churchill rail line

Spring flooding washed out multiple sections of the railway to Churchill earlier this year. (Omnitrax)

Cautious optimism

Dumas is frustrated this deal couldn't have been worked out in the summer, when there would have been time to repair the line before winter.

"Regardless, the opportunity is here now and we're just going to have to adjust how we can remedy and fix the situation," he said.

Thompson Mayor Dennis Fenske is cautiously optimistic about the possible deal but still concerned about "slowness on the ground."

"There's a lot of talk … but there's not a lot of backing that up with action," he said. "To put it into perspective, if you shut down the Trans-Canada [Highway] either from Saskatchewan to Winnipeg or from  Kenora to Winnipeg, what reaction would the province or the feds have?"

He says gas is $1.19 in Thompson right now. In Churchill, gas was selling recently for as much as $2.30 per litre.

Earlier this week, Omnitrax said it intends to ask for independent arbitration under NAFTA — alleging the federal government has "sabotaged" efforts to repair and transfer ownership of the line.

The federal government responded by saying it plans to sue Omnitrax for $18 million for violating terms of a 2008 agreement that saw the federal and Manitoba provincial governments pledge $20 million each to help upgrade the railway.

The contract that came with the money said Omnitrax had to complete the upgrades by October 2018. That was extended to 2019.

Transport Canada said in an email to CBC News that under the agreement, Omnitrax also had to maintain and operate the rail line for 10 years after repairs were completed — until 2029.

With files from Caroline Barghout, Sean Kavanagh and Leif Larsen