Quarter after quarter for several years, Canadian National Railway’s Chief Executive Officer Claude Mongeau took pride in pointing to the steadily improving safety record of his company and its 22,000 employees.
Not so much anymore for a company that proclaims itself as “North America’s railroad.”
In fact, the boss has just felt a rap over his knuckles as a result of “deterioration” in CN’s safety record in 2014.
His bonus was capped after mainline derailments climbed to 57, up 73 percent from 2013.
That trend has extended into 2015, with two fiery derailments by crude trains in northern Ontario.
The tally was well above the 2009-13 average of 39 accidents per year across a network that covers 21,000 miles, with at least 27 of the derailments in Canada blamed on track problems, compared with the previous annual average of 14.
The performance has prompted Transport Minister Lisa Raitt to ask a committee of Canada’s Parliament to examine CN’s operations as Petroleum News Bakken reported March 22.
Where the buck stops
The growing public concern over crude-related accidents has landed squarely on Mongeau.
Although he was paid C$9.3 million in 2014, up 14 percent from 2013, CN’s directors have taken the unusual step of trimming a portion of his eligible bonus because of the rise in derailments and employee injuries, without saying exactly how much he lost.
His total compensation last year included a salary of C$1.2 million, a bonus of C$2.5 million and stock awards valued at C$3.3 million.
In addition, Mongeau holds stock options of C$65.6 million and shares worth C$49.7 million.
For 2015, “safety and sustainability” will be one of five factors that will measure Mongeau’s performance and determine his next bonus, a company spokesman said.
An analysis conducted by Reuters suggests CN could face more intense regulatory pressure, possibly resulting in higher costs for shipping crude by rail in Canada.
Track failure
Reacting to the Ontario accidents, Canada’s Transportation Safety Board pinned much of the blame on track failure, suggesting crude unit trains could make tracks more susceptible to defects.
CN will refrain from commenting on those accidents until investigations are completed, although the railway doubted that crude unit trains were responsible, noting that other heavier loads have run safely for decades.
But it has hired independent experts to review the issues.
CN told the news agency it is “keenly aware of its recent safety trends, starting with a sudden increase in its accident rate in 2014,” forcing it to start testing tracks more frequently, increasing spending on infrastructure and introducing new technology to detect weaknesses in tracks and equipment.
That capital outlay will grow by C$300 million this year to C$2.6 billion.
Too long, too heavy, too fast
CN said it is “important to view CN’s safety performance over a span of time to assess meaningful trend lines, not just on the basis of a single- or two-year perspective.”
Its own statistics, used by Reuters, showed its Canadian accident rate dropped 26 percent from 2007 to 2013 to 1.71 accidents per million train miles, then climbed to 2.67 last year, its highest level in at least a decade.
Doug Finnson, president of the Teamsters union representing CN’s train crews, said the union is on record as saying “the trains are too long, the cars are too heavy and the trains go too fast.”
In contrast, rival Canadian Pacific Railway posted a better safety record last year in moving crude.
CN hauled 128,000 tanker loads, or 2 percent of its freight volume, while CP moved 110,000 tankers, 4 percent of its total.
