Two of North America’s largest railroads — Canadian National and Canadian Pacific — are standing resolutely behind their safety record despite a string of recent derailments and anticipate continued growth in their crude-by-rail shipments.
CP is forecasting a doubling of those volumes from Alberta and Saskatchewan to refineries in the United States and Eastern Canada by 2015, said Chief Marketing Officer Jane O’Hagan.
Regardless of possible new regulations governing the safety of tank cars and the expected startup of new pipelines, CP is targeting the movement of 140,000-210,000 cars in 2015, compared with this year’s predicted 90,000 cars, with each car offering capacity of 500-680 barrels, she told analysts in a fourth-quarter conference call.
O’Hagan said CP sees no reason to “revise our guidance” in response to recommendations in January by the U.S. and Canadian transportation safety boards to regulators and governments in their respective countries.
“We are keeping an eye on those recommendations and in the current year we will make strategic investments in new siding to ease congestions, loading facilities and focus on safety,” she said.
O’Hagan said there is rising interest among refinery operators to secure greater volumes of heavy crudes from Western Canada, which Chief Executive Officer Hunter Harrison is counting on along with cost cutting to contribute to an increase in revenue of 6 percent-7 percent this year to about $6.5 billion. Crude accounts for about 4 percent of its carloads.
Keith Creel, CP’s chief operating officer, said the railway has improved its accident total by 20 percent last year from 2012.
CN also cites improved safety
CN Chief Executive Officer Claude Mongeau said his company improved on its accident ratio by 9 percent last year.
He said the accident rate per million train miles was 1.92 in 2013 compared with 2.10 in 2012, including 33 main-track accidents, which Mongeau said have declined by more than 50 percent over the past decade despite greater freight volumes.
He said CN is committed to working with rail regulators on the use of older DOT-111 tank cars, which the U.S. and Canadian safety watchdogs favor phasing out.
“What we know now is that the DOT-111 is ... more prone to failure. It has a low probability of having an accident, but the high severity of the consequences is calling into question the design of the cars,” he said.
Mongeau agreed with the safety boards that the DOT-111 should be phased out and replaced with a new tank car design, but he didn’t offer any timelines for a changeover.
He does not expect any regulatory changes to have an impact on demand for shipping crude by rail.
Enforcement touted
Michael Bourque, chief executive officer of the Railway Association of Canada, said in a Financial Post article the industry has a 90 percent success rate in implementing safety board recommendations, while CN and CP are recognized as the two safest railroads in North America.
He said it is “unfortunate that, despite the declining accident rates over the past 12 years, some critics choose to focus only on high profile accidents and to draw broad-based conclusions about the industry and the regulatory framework.”
Bourque also challenged the argument that the industry is “self-regulated,” noting that in Canada railways operate under the Railway Safety Act, which has been regularly reviewed and updated since it was introduced 25 years ago.
“It provides for a robust regime of regulatory inspections, oversight, compliance and enforcement actions, including recently enhanced administrative monetary penalties against companies and individuals for violations,” he said, noting that Transport Canada conducted 30,000 inspections of railway operations in 2012.
He said railways and regulators have taken a “comprehensive view on ways to achieve further safety improvements (since the Lac-Megantic disaster in Quebec last July).”
