By Jack Danylchuk -- A disastrous 2007 shipping season sullied its reputation, but senior management insists a new and improved NTCL is on the way.

You could call it the year from hell. Excepting the loss of fuel supply contracts in Nunavut to competitors in 2002, the past year has been the most challenging in the 74 years the Northern Transportation Company Ltd. has been shipping cargo to communities and industry across the Arctic. The company lost the first three weeks of the short Northern shipping season to delays in deploying navigation buoys; key customers miscalculated needs; the weather closed in, which iced in barges and tugs. Then this spring a flood swamped company headquarters in Hay River, NWT, where 1,400 tonnes from the previous season were still waiting to be shipped.

“Every week seemed to bring some fresh hell,” says Sunny Munroe, NTCL’s unflappable spokesperson. “It was one thing after another. There are problems every year, but last year there was no room to accommodate these things. People wondered if we knew what we were doing. From outside of the company, it must not have looked it.”

As the misery piled up, all eyes were on senior company management, most notably president David Foster. Foster is unlike any of his immediate predecessors. Cameron Clement, who moved the company headquarters north from Edmonton, learned the tug and barge business from inside NTCL, working his way up from the yard in Hay River, NWT to the executive suite. Cliff Abraham, Clement’s successor, died suddenly in 2003, just a year after taking over.

Foster, a professional engineer with an MBA and a diploma in naval architecture, had 20 years in senior positions in marine-related organizations in Atlantic Canada and the U.S., and project work in Europe. He joined NTCL in 2003 as vice-president of operations and was promoted to the president’s job shortly after Abraham’s death.

In the diplomatic language of corporate announcements, Carmen Loberg, president of NorTerra Inc. (the holding company for the Inuvialuit Development Corporation and Nunasi Corporation, which jointly own NTCL) said Foster would chart “the growth and development of the company as it expands its horizons to meet the transportation needs of Canada’s rapidly growing Northern economy.”

The subtext was that Foster had a licence to exorcise the cozy culture of a crown corporation that persisted almost 20 years after the Inuvialuit of the NWT and the Inuit of Nunavut bought NTCL from the federal government. He was expected to transform it into a modern, competitive and strategic transportation company. But after the year it had in 2007, shareholders had to wonder if Foster could make it happen.

The past 12 months had tarnished the image of a company with a long history in Canada’s North. NTCL can trace its origins to the marine subsidiaries of the Hudson’s Bay Company, which served Northern trading posts and Mackenzie River communities. Development of uranium deposits on Great Bear Lake shifted ownership to Eldorado Mines. When uranium became a strategic resource in the Second
World War, Eldorado and the transportation company were nationalized.

The company has not changed its operating model since the late 1970s, when it left the Athabasca River and Fort McMurray, the hub of Northern transportation for most of the last century. NTCL settled operations in Hay River where, a few years earlier, the federal government built a ship and marshalling yard in anticipation of supplying the Mackenzie Valley gas pipeline.

Over the years, the company has developed a spider web of infrastructure in the region. In the NWT it has regional terminals in Inuvik and Tuktoyaktuk. It has offices in Halifax; Churchill, Manitoba; Arviat and Rankin Inlet, Nunavut; Anchorage, Alaska and Calgary. Tuktoyaktuk is the Arctic staging and transshipment point. From Tuktoyaktuk, NTCL tugs start their voyages to communities as far west as Barrow, Alaska and as far east as Taloyoak, Nunavut.

Cambridge Bay serves Nunavut’s Kitikmeot region and NTCL’s Churchill office handles freight to Nunavut’s Kivalliq communities. NTCL’s two Arctic Class II supply vessels are based in Halifax, the company’s base of operations and administration for the Eastern Arctic and Eastern Canada. For the past three years, both ships have been on charter almost continuously, working in Alaska’s Chukchi Sea and the Beaufort Sea.

Stories of the company’s sale by Ottawa in 1985 are the stuff of Northern folklore. According to Loberg, there were three options: a private buyer, a management buyout or sale to the Inuvialuit and Inuit. People of the Northern communities have a powerful emotional attachment to the company. For many isolated communities along the Mackenzie River and in Nunavut, goods cannot be trucked in for much of the year, if at all. Thus, NTCL has been their lifeline for generations. They did not want it sold to private interests. The Dene people of the NWT may also have wanted a piece of NTCL but were not part of the final deal. Loberg declines to reveal the sale price or the current value of NTCL. But the NorTerra financial statement for 2006 hints at the worth of the company’s dozen tugs and 90 barges, valuing machinery and equipment at $48-million. NTCL assets are split equally with Nunasi Corp., which could put the company’s worth at around $100-million.

Marine equipment costs have been rapidly inflating, with a barge priced a year ago at $4.6-million commanding $7-million today. A used tug that was on the market for $11-million is now $26-million. Many vessels in the NTCL fleet are 30 years old, but they work just five months a year in a Northern climate where vessels do not rust in comparison to the rapid degradation experienced by those in warmer climates. “It has been a good investment,” Loberg says. “The future of NTCL looks good. There is a lot of activity and it’s one of the few companies that really knows first-hand marine transportation in the Western Arctic and the Kitikmeot.”

However, Loberg’s assertion of NTCL’s skill at moving cargo in Arctic waters was put to the test in 2007. Concerns in the communities with the quality of NTCL service weigh heavily on management, as the communities are the core of the company’s business and its shareholders. Mining and exploration companies look to NTCL to guide them in a difficult and hostile environment, but for the remote communities, “we are their lifeline,” Foster says. And the communities are not merely inconvenienced when goods don’t arrive as scheduled; the cost expended on alternate delivery subtracts from the profitability of their investment.

And so Foster found himself at a meeting late last fall in Cambridge Bay with Kitikmeot-area mayors, who are both clients and, through Nunasi Corp., shareholders in NTCL, to explain why stores in the hamlet of Taloyoak were without laundry detergent and toilet paper for two weeks last winter. Anxious residents waited for construction materials and continued to pay air-freight charges on food while waiting for supplies. The barges did finally arrive, but too late to start work on construction projects in the communities. Cement for Mirimar Mining Corp.’s Doris North gold project was left on the dock in Hay River and wasn’t shipped until this season.

Foster told them that the company is developing a different system, that there would be more ships and separate deliveries to the different communities, “to ensure an on-time, reliable, consistent service. Our intent is to increase our volume of service to the communities and also to provide valuable marine Arctic transportation to projects.” Taloyoak mayor Jimmy Oleekatalik welcomed the promise of better service but also admitted his community has no alternative. “I’ve got to trust them,” he says.

NTCL made the same commitment to communities in Nunavut’s Kivalliq region, where it was criticized last year for poor service and poor communication with its community customers, and for leaving some cargo stranded when ice forced a tug with two barges to turn back from Baker Lake and return to Rankin Inlet. The cargo was eventually delivered by overland transport between February and the end of April.

The company has since identified some reasons why deliveries went awry. NTCL spokesperson Sunny Munroe says because of a shortage of office staff in Rankin Inlet, customers had difficulty finding out when their freight would be delivered. She says NTCL delivered 25,000 tonnes of freight into the region in 2007, most of it in the last few weeks of the season. This year, NTCL has added more staff, including a ship’s purser who will be instrumental in ensuring that freight reaches the intended community customers. NTCL has also staffed an office in Arviat, and has expanded its barge fleet in time for the season that started in July from Churchill.

NTCL was built to work the Mackenzie River. The tugs are shallow draft and the barges are small, good for moving freight through the shallow water of the Mackenzie, but not the most efficient way to get supplies to the Western Arctic. It can be cheaper and faster to route goods to the Arctic through Vancouver’s port.

Just before he retired, Cameron Clement recognized NTCL had to change the way it did business. And so he outlined a future for the company based on an ocean-going tug and barge, working summers in the Eastern or Western Arctic and elsewhere in the world in winter. NTCL’s smaller tugs and barges would continue to service the small communities. The future Clement described contemplated a fundamental change in NTCL operations; it foresaw a day when a road linked the isolated communities of the Mackenzie Valley to the outside world and they were no longer reliant on tug and barge service. This scenario saw the focus of the company’s operations shifting from Hay River to a deep-sea port proposed for Bathurst Inlet, Nunavut.

However, the Bathurst Inlet port and road project is still working its way through environmental impact reviews. NTCL remains interested in its potential, but company management is now moving forward with an alternate plan. For the past four seasons, it has shipped fuel north from refineries on the West Coast, around Alaska and into the Canadian Arctic.

“This will be the first year we’ll be delivering fuel by the over-the-top route directly into coastal communities of the Beaufort, the Kitikmeot and the Western Arctic by tanker,” Foster says. He outlined plans to build on the fuel delivery model with the lease of an ocean-going tug and 10,000-tonne barge that will move material to communities and resource projects. NorTerra’s board of directors is mulling over the purchase of both, a signal that NTCL was in for the long haul on this route – not just for a season or two. But Foster emphasized that there is “no contemplation of shifting the base of operations north from Hay River to the Arctic coast. Hay River has long been the hub of the North, the transition from land to water, and will remain an important part of NTCL operations.”

In a search of new customers for NTCL’s shallow-draft tugs, Foster has looked south to the company’s former base of operations, Fort McMurray, and the oilsands projects on the Athabasca River. A voyage two summers ago demonstrated the feasibility of portaging large plant modules around the Slave River rapids at Fort Smith, NWT. The modules would be manufactured and assembled overseas and shipped to Tuktoyaktuk where they would be off-loaded to barges for transport up the Mackenzie River and across Great Slave Lake to Fort Smith. Earlier this year, NTCL and Mammoet, a Dutch-owned heavy lift company with worldwide operations, finalized negotiations to form a joint venture company, Arctic Module Inland Transportation Ltd. (AMIT).

Synenco, a Chinese-controlled investor in the oilsands, was an early potential candidate for the service. But that project is off the schedule. Not enough reserves were proved up on Synenco’s lease and so far, no other customer has committed to the route.

Some may have also been put off by the limitations imposed by the Deh Cho Bridge being built at Fort Providence, NWT. The bridge won’t pose a problem for regular NTCL operations. The deck is 23 metres above the water line – safely above the company’s regular need for 19 metres of clearance. But some clients proposed moving modules that required 30 metres of clearance on the river.

NTCL may even get business from a former customer on Lake Athabasca. Before uranium prices imploded in the late 1970s, NTCL made regular supply runs to Uranium City, located in northern Saskatchewan. With uranium prices at a historic high, mining companies may put the largely abandoned community back on NTCL’s map.

Unfortunately for NTCL, some of these opportunities remain just that. Yet Loberg is bullish on the company’s prospects and on Foster’s ability to distance NTCL from its days as a sleepy crown corporation. “The growing volume of activity bodes well for the company’s future. I’m pleased with the way things are sorting out at NTCL. It’s a challenge to change the culture of a company that has evolved over six or seven decades. But if we don’t change, we’ll be left standing on the dock.”