CP Railway, Agrium in toxic liability tussle

Mark Milam

18-Sep-2015

A Canadian Pacific train passes through Morant
A contract case between two Canadian companies has landed in front of the US Surface Transportation Board, which could have implications for transporting toxic chemicals. Shown above, a  Canadian Pacific train passes through Morant’s Curve along the Bow River in Banff National Park, Alberta. Image: Design Pics Inc/REX Shutterstock

HOUSTON (ICIS)–A contract case between two Canadian companies has landed in front of the US Surface Transportation Board (STB) which, depending on its eventual outcome, could have implications for the transportation of toxic chemicals.

The case also could impact one of the most economical and reliable means of distribution for the fertilizer marketplace.

Canadian fertilizer major Agrium raised the challenge after Canadian Pacific Railway changed the tariff provision in its contract to shift responsibility in a potentially deadly train disaster. The dispute falls under the US agency’s jurisdiction because a portion of the rail system is within the US, primarily the upper Midwest.

Railroads have come under greater scrutiny as the public has grown increasingly wary of the potential danger caused by hazardous spills from all sectors of manufacturing, not just chemicals and fertilizers.

A market source said that the fertilizer industry still relies heavily on moving product by rail as it travels from storage facilities to retail outlets where farmers can acquire their crop nutrients.

In particular, a concern would be how this could hinder ammonia shipments. The direct application market moves 4m tonnes/year. “People are still railing it from New Orleans up to the Midwest, but where this could really affect things is in what comes down from Canada,” the source said.

Agrium first filed its compliant over the contract wording on 15 May, claiming that it unlawfully shifts responsibility in a toxic discharge regardless of fault.

A larger concern, Agrium charged, is that this modification leaves it unclear about accounting for any negligence or willful misconduct on the railroad’s part, making it possible for Canadian Pacific to sidestep any fault or damages.

On 11 September, the STB ruled against a dismissal motion by Canadian Pacific, which argued that it had not actually imposed such a measure and that Agrium failed to allege actual harm caused by the contract change.

STB decided that Canadian Pacific had not met the burden of proof.

Through a spokesperson, Agrium officials said this week that the revision “was discovered when CP published a tariff relating to hazardous materials”.

The fertilizer producer specifically noted that the document had a line item which would allow for the unilateral transfer of liability.

Agrium declined further comment on the case. A spokesperson said Canadian Pacific was reviewing the US agency’s decision but could not comment further.

For now, the case will continue before the STB, which has extended the discovery phase until 14 December. Agrium is to make its opening statement on 12 February 2016.

Canadian Pacific’s reply is due by 12 April 2016, with Agrium’s final response due by 12 May 2016. At this time, the board has not revealed a deadline for when it will issue a final determination.

While other fertilizer majors like PotashCorp and Mosaic have not commented on cases like this, the industry has always maintained that it remains very dependent on the domestic rail system.

This pro-railroad stance comes despite public perception that this mode of transportation is outdated and inherently dangerous.

The industry strongly views railroad shipments as its most economical and reliable means to get products to the US farmers who produce tremendous amounts of crops.

Close-up image: A Canadian Pacific freight train pulls into Banff station, Banff National Park in Alberta. (Neal Clark/Robert Harding/REX Shutterstock)

Focus article by Mark Milam

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