Omnitrax is raising fees, cutting service and moving equipment out of Manitoba, prompting even more concern about how people will get the goods and services they need in the north, sources tell CBC News.

And they say the rail company has reduced staff and is doing the bare minimum when it comes to maintaining the rail line.

"It's hard to explain what's happened. It's sad what they [Omnitrax] have done to the railway in northern Manitoba," said one person with intimate knowledge of the rail business in the region, who CBC has agreed not to identify.

After a winter of blizzards and a spring of severe flooding, sections of the Omnitrax-operated rail line to Churchill, a community of 800 located about 1,000 kilometres north of Winnipeg, washed out. That's left the town without a ground transport connection.

Omnitrax has been engaged in a battle with Ottawa over who should pay for the repairs to the line.

And now, one of Omnitrax's partners says the Denver-based company has started charging it extra fees.

For the first time in 11 years, Omnitrax started charging the Keewatin Rail Company $250 per freight car, plus an additional $1,500 fee, to add freight cars to a passenger train, said Anthony Mayham, KRC's chief executive officer.

Keewatin Rail operates a short-haul line from the Manitoba communities of The Pas to Pukatawagan in partnership with Omnitrax.

"It just came out of the blue. We heard it through local staff. We didn't get it from the company," Mayham says.

Mayham says KRC has no choice but to pass the new charges along to its customers on the line. Pukatawagan First Nation, which is in the midst of extensive infrastructure improvements for housing and sewage, will have to bear the extra costs.

"It's discouraging," Mayham says. "It's forcing us to raise the price to the community."

Maintenance work piles up as company sheds workers: sources

According to people with knowledge of Omnitrax's operations, something changed in the company's strategy on its Manitoba operation, starting perhaps a decade ago.

"[Omnitrax] started out with such high hopes," said another source, who has years of experience with the rail line. "But then [around] 10 years ago they started only doing the bare minimum to get the trains down the line.… It's just got worse and worse."

CBC News is not naming individuals who provided background of the operations of the Omnitrax-owned Hudson Bay Railway, which runs the line between The Pas and Churchill, as they expressed fear of reprisal.

Via rail cars were shipped out of Churchill by sea instead of by land in October. '[Around] 10 years ago [Omnitrax] started only doing the bare minimum to get the trains down the line,' a source told CBC. 'It's just got worse and worse.' (Sean Kavanagh/CBC News)

The tracks are still safe, says one source, because the speed at which the trains operate — under 20 kilometres per hour in many sections — is so low.

But according to sources, there has been a steady decline in the maintenance on the 1,000 kilometres of Hudson Bay Railway track for years.

"There are still [unused] crib ties lying on the ground along the track for two years now," one person told CBC News.

The maintenance crew working on the line from The Pas to Gillam has included between 60 and 70 employees in the past. It's now down to approximately 23 workers, the source says.

The operational staff complement at the Omnitrax yard in The Pas was halved from approximately 16 to eight, CBC News was told.

"I can't believe they are running a railway with eight employees," the source says.

Ottawa's lawsuit threat a turning point

One source said there was an immediate reaction inside Omnitrax's Manitoba operations when the federal government told the company in October it had 30 days to repair the line to Churchill or face a lawsuit.

"As soon as the lawsuit was threatened, people started to get laid off," the source said. "You could absolutely feel a ripple."

"Absolutely," said a second source. "They stopped spending. We noticed [it] instantly."

Across the region, there are signs of Omnitrax slowly collapsing its operations.

Sources with knowledge of the company's operations tells CBC News that equipment is being moved away.

"That has started," one source told CBC News. "Eight locomotives are gone.… [They] left attached to a CN train."

Another source confirmed a number of locomotives had been moved south but wasn't sure if the total was seven or eight.

The source couldn't be sure where the equipment was destined but believed they "are probably headed to the [United] States."

'An effort to limit our financial losses': Omnitrax

Omnitrax acknowledges equipment has been removed from the region, saying it has reduced rail service along the line and the decision was a matter of economics.

"These decisions were made in an effort to limit our financial losses in this business, and for no other reason," wrote Peter Touesnard, the chief commercial officer for Omnitrax.

"Since June, we have consistently made clear that the Hudson Bay Railway is not a profitable or commercially viable operation. The company is reducing operations on the line to correspond with the decline in demand."

Another source familar with northern rail operations told CBC News "the sense we are getting is they are slowly abandoning the line."

The same source said the company is moving track maintenance equipment back to companies from which it was leased.

Omnitrax, which has owned the railway and the now-closed Port of Churchill since 1997, received nearly $40 million from the federal and provincial governments starting in 2008 to upgrade the railway, with the expectation that the company would kick in another $20 million.

A spokesperson for Transport Canada said the contract with Ottawa requires Omnitrax to operate, maintain and repair the entire Hudson Bay Railway line in a diligent and timely manner until March 31, 2029.

CBC News requested the number of inspections and orders made by Transport Canada to Omnitrax for the line from The Pas to Churchill, but was only provided with details on the the farthest north section of track damaged by the flood.

Omnitrax responded to concerns over maintenance.

"We unequivocally reject any implication that work done on the line up until this catastrophe [the flood in May] wasn't quality work," wrote Touesnard.

"That suggestion is not only false, but an insult to our employees who have worked tirelessly over the years to ensure service to the people of northern Manitoba in extremely challenging environmental circumstances," he wrote.

"The operating portion of the line is, and will continue to be, maintained to Transport Canada standards."

Thompson mayor 'very, very concerned' about fuel shipments

Thompson Mayor Dennis Fenske has short-, medium- and long-term headaches on his desk from the rail-line problem.

In a region already battered by mine closures and layoffs, he says the Omnitrax/Hudson Bay Railway staff presence is now down to zero, draining precious jobs from the region.

Fuel suppliers to the community told his office Omnitrax is cutting the number of shipments of vital supplies of propane and gas, forcing the companies to use trucks to haul some of it north.

Fenske sees the 760 kilometres from Winnipeg to Thompson on Highway 6 becoming a safety issue as the route gets loaded with extra trucks hauling commodities such as propane.

"In the winter time, with the additional truck traffic and the winter storms, it's just a recipe for a safety issue that we are very, very concerned about," Fenske says.

Fuel is not the only commodity normally shipped from the south to the north by rail, and Fenske sees supply issues for a variety of goods looming as Omnitrax cuts service along the line from The Pas going north.

Thompson Mayor Dennis Fenske says Omnitrax's decision to curtail fuel deliveries to his city means more trucks on the highway, which raises safety concerns. (CBC News )

Fenske, long resigned to looking for metaphors that southerners can appreciate, draws a comparison between Canada's signature highway and the northern rail line to illustrate its importance.

"If you shut down the Trans-Canada Highway to Saskatchewan or Ontario, that's what's happened by shutting down the line from Gillam to Churchill, and that's the pending action that may happen if the line from The Pas to Gillam is affected any more than it already is," Fenske said.

Transport Canada responded by email to CBC News questions about Omnitrax's decision to cut the number of fuel deliveries to Thompson, promising the department is "monitoring the situation."

"The Government of Canada understands the concerns of the residents of Thompson regarding fuel delivery and Omnitrax Inc.'s decision to reduce freight service from The Pas to Thompson to once per week," a spokesperson wrote.

"The Government of Canada remains committed to delivering a successful outcome for the people and communities in northern Manitoba."

'Why don't they just fix it?'

The ripples of Omnitrax's downshift in operations are being felt across the north. The Pas Mayor Jim Scott has seen the company's presence dwindle as staff have been laid off.

Scott, like his counterparts in other northern communities, has deep scorn for how Omnitrax has treated the region, but his frustration with the federal government is nearly as strong.

"Why don't they just fix it?" Scott said with more than a hint of exasperation, asking a question on the lips of many northerners.

Churchill Mayor Mike Spence says Omnitrax has let its northern partners down. (CBC News )

If Scott is exasperated, Churchill Mayor Mike Spence is ready to explode.

For months, the political head of that small northern Manitoba town has fronted the effort to get the rail line repaired, shunting back and forth between Omnitrax, the federal government, and One North — the group he co-chairs that wants to buy the railroad and port.

Spence has long argued maintenance on the rail line is an issue and said many people in the region don't see Omnitrax as a good corporate citizen.

"With northern partners like us and the importance of relationships — that's all deteriorated. These are missed opportunities," he said.

"And here we are, you know, such a strategic location. We know the investment hasn't gone into the asset."

Spence sees the cost of several programs and short-term solutions as a waste compared to simply repairing the damaged line in the first place.

"Fuel, food subsidy, the extra cost to move petroleum products, enhancing their storage facilities at the airport, increased construction costs — that's 10s of millions of dollars," Spence told CBC News.

But Spence remains optimistic. He said if he can get all the players around a table and get a deal to buy the rail line and port from Omnitrax, the future for his town looks bright.