Canada’s two big railroads — Canadian National and Canadian Pacific — like to roll out more statistics than a bank economist to shore up their public case that they operate safe, reliable services.
The one that gets used most often is based on a Railway Association of Canada claim that 99.9977 percent of dangerous goods reach their destination without incident.
In addition, the Transportation Safety Board of Canada reported 63 derailments in Canada in 2012, down from an annual average 107 over the previous five years, with the total through the first seven months of 2013 at 56.
Not that the companies are resting on their laurels, they’re quick to reassure an increasingly uneasy outside world.
Claude Mongeau, chief executive officer of CN Rail, told analysts Oct. 22 that “we have to keep getting better.”
But CN’s positive spin on rail safety is a tough sell in the midst of its efforts to restore service on the east-west line between Edmonton and the British Columbia coast after a derailment of 13 cars carrying crude and LPG triggered a fire and explosion that forced the evacuation of 126 residents from the nearby hamlet of Gainford.
Coming less than four months after 47 lives were snuffed out in the Quebec town of Lac-Megantic when a Montreal, Maine and Atlantic train derailed, the Gainford “incident” occurred two days after people in Sexsmith, Alberta, were evacuated when a CN train carrying ammonia derailed and a month after 17 cars on a CN train carrying petroleum, ethanol and chemicals left the tracks in Saskatchewan.
CP Rail also picked up a couple of blemishes in June from derailments in Calgary of trains carrying petroleum products.
Shipments planned to grow
Those events coincide with year-end 2014 forecasts by the Canadian Association of Petroleum Producers that 300,000 barrels per day of crude could be moved by rail in Canada, while shipments across North American are expected to reach 2 million bpd.
What troubles critics is the plan the rail industry has to grow its resource-related business.
CP Executive Vice President Jane O’Hagan told a third-quarter conference call that her company expects to increase its crude business by shipping more heavy grades from Western Canada as new loading terminals come into service.
“Over time we will see increasing volumes of heavy crude moving with different economics and drivers of demand than the lighter Bakken crude that we predominantly move today,” she said.
O’Hagan noted that the heavier crudes are not as susceptible to shipping margin impacts from narrowing key benchmark price spreads, which have tightened this year, cutting into profitability margins for railing Bakken crude to coastal refining markets.
“We are seeing orders pick up in October as spreads have widened recently,” she said. “Although we don’t know how long this will persist, our crude market will always be a combination of the consistent term volumes and the opportunistic volumes that respond to the movement of spreads.”
More sand will be shipped
CP Rail is also making plans to move more frack sand volumes which posted double-digit volume growth during the third quarter, O’Hagan said, without disclosing the actual volumes.
CN’s Mongeau told analysts he is doubtful that the rural Alberta derailment will impact his company’s insurance rates.
“I am hopeful that by the time we finish the year we may be, if not the leader in terms of safety, then we’ll be one of the top railroads.
“We have more protection technology deployed, we have a very structured response, and at the end of the day the insurers look at facts in setting your premium.
“We have an unwavering commitment to operating a safe railroad,” Mongeau said, arguing that CN’s record of about two or three accidents every month along with the fact that about 10 percent of the 1 billion metric tons of commodities it handles each year is classified as dangerous “is quite remarkable.”
He said it will be difficult to improve on that safety performance, but CN is pledged to “continue to improve.”
