Canadian Pacific considered exiting oil rail shipment business – CEO

27 February 2014 18:03  [Source: ICIS news]

TORONTO (ICIS)--Rail carrier Canadian Pacific (CP) briefly discussed exiting crude oil railcar shipments but decided that it was obliged to continue that part of its business, the company’s CEO said in an interview on Canadian business television on Thursday.

North American crude oil railcar shipments are booming amid tight pipeline capacities. However, a number of high-profile accidents have raised questions about the safety of shipping oil by rail and put the industry under public pressure.

CP CEO Hunter Harrison said that as a common rail carrier the company had a legal obligation to offer oil railcar transportation, and could not just abandon it.

Furthermore, CP had a “civic duty” to ship oil as safely as it can because if rail carriers stopped that part of their business, the oil would likely end up being shipped by truck on highways, “and that’s probably not the right place for the general public.”

However, from a business point of view, CP would not see a big impact if it stopped shipping oil, which currently accounts for less than 5% of its overall business, Harrison said.

Asked about recent measures by the US Department of Transportation (DOT) that target safety in oil railcar shipping, Harrison said that he doubted that they would be of much help.

He was especially critical of proposed speed limits.

“With the railways, if you have trains that running at 60 [miles per hour], and some running 40 and some running 30, that just causes more delay," he said.

“Frankly, I have not seen regulations yet that excite me, that say ‘this is really going to have a big impact on fixing this situation',” Harrison said.

He strongly 
recommended that the industry stop using the puncture-prone DOT-111 type of tank railcar.

“Let’s stop now moving those cars, [where] the consensus is that they are not safe in case of a derailment,” he said. “Let’s stop talking about it; let’s do something about it,” he added.

CP, for its part, would consider buying new tank railcars if a shipper committed to a long-term oil shipping deal with the company, he said.

Tank railcars are generally not owned by railroad companies directly because of their restricted special use to only one type of commodity, he said.

Harrison added that he supported DOT measures to make existing tank railcars more robust.

CP was willing to invest in helping to retrofit existing tank railcars, which could be done “pretty quickly” if it can be agreed with the firms that own the railcars, Harrison said.

However, retrofitting had to be profitable, he said.

“We are not going to do it for charity, we would like to get a fair return,” he said, but added that CP would not compromise safety to increase profits.

Harrison also suggested that the rail industry make better use of video camera’s to supervise train drivers and engineers. Rail labour unions have argued against this, citing privacy reasons.

Harrison said that the industry should use “every bit of technology” to help improve safety.

Video cameras are a valuable deterrent in enforcing safe crew conduct - just as radar and a police car on the highway deters drivers from speeding, he said.

The important thing was to quickly take meaningful steps, or “we are going to sit here in three years, still studying it – and God forbid if in the two or three years we are studying this we have some other tragic incident,” he said.

Oil, propane and other hazardous materials continue to be shipped “right through the centre” of cities like Toronto, Montreal, Chicago or New York, he added. 

Even though the likelihood of an accident happening in a major city was “probably very, very low” – an accident could happen, he said.

In related industry news, Canadian refiner Irving Oil confirmed this week that it will, by 30 April, voluntarily remove older DOT 111 tank railcars from its fleet. 

DOT 111 railcars were implicated in a fatal accident last year when a train carrying Bakken crude derailed and exploded at the centre of a small Quebec town, killing 47 people. The oil was meant for Irving's refinery in New Brunswick province.

By: Stefan Baumgarten
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