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New TSB rules would not have prevented Lac-Mégantic disaster, says CP Rail head

Hunter Harrison, chief executive officer of Canadian Pacific Railway Ltd., speaks during the company's annual shareholders meeting in Toronto, Ontario, Canada, on Wednesday, May 1, 2013. Canadian Pacific Railway Ltd. posted higher first-quarter earnings than analysts estimated as Harrison makes progress on profitability goals set during last year’s proxy fight. Photographer: Norm Betts/Bloomberg *** Local Caption *** Hunter Harrison

Norm Betts/Bloomberg

Regulators have "overreacted" to the fatal derailment in Lac-Mégantic by imposing needless regulations on the rail industry, says Hunter Harrison, chief executive officer of Canadian Pacific Railway Ltd.

Mr. Harrison said human error caused a Montreal, Maine & Atlantic train hauling crude oil to roll down a hill and explode in the summer of 2013, killing 47 people and destroying much of the Quebec town. Slower speed limits or other rules that have been proposed or implemented since would not have prevented the disaster, he said.

"Lac-Mégantic happened, in my view, because of one person's behaviour, if I read the file right," Mr. Harrison said in an interview. "An individual did not set the brakes. And I think that we have overreacted and looked at a thousand different things about what we want to do with [regulations]. And you're not going to write [regulations] that are going to stop behaviour."

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In the wake of Lac-Mégantic, Canada's Transportation Safety Board made recommendations that call for railways to install better brakes on trains, have equipment at hand in the case of disasters, and divert dangerous-goods trains from populated areas.

Opposition parties and rail safety advocates say the regulations already implemented have not gone far enough to prevent another oil train explosion. Since the changes, three more large-scale oil train explosions have occurred in the U.S.

Mr. Harrison made the comments after making a presentation to investors in White Plains, N.Y., on the company's four-year growth strategy. He added that the rail industry can safely move a range of goods, including oil. But he said rules that force rail companies to move more grain in Western Canada and parts of the U.S. are incompatible with calls for slower speeds.

The push for new regulations "has really been, on a relative basis, blown out of proportion as far as what the reaction should be," he said. "Think about what's going on today in North America in both countries, regulators, legislators, shippers are saying you gotta move more stuff, you gotta move it faster, you gotta move it safer. But, by the way you gotta slow down. It doesn't work."

The train that exploded in Lac-Mégantic was carrying crude oil from the Bakken region of North Dakota. CP locomotives pulled the train from North Dakota to Montreal, where it was put in the hands of MM&A. Investigators later determined the oil was far more volatile than most kinds of crude, and have since required Bakken crude to be labelled as more explosive.

Mr. Harrison, who once said he could not sleep after the disaster, recounted his horror at the images of the town in flames. "Have I seen larger derailments? Yeah, but have I seen the life of 47 people lost and the devastation? No. But … there was a lot learning to go through. We, the shipping community, did not know the properties [of the oil]," he said. "One of my first observations when I saw that big cloud in the sky was, 'That's not crude.' Not the crude that I thought about. Though I didn't know it had the different properties that it had."

Mr. Harrison said Calgary-based CP has built better tracks and infrastructure in North Dakota, and that the industry is better prepared to handle Bakken crude now that its more explosive properties are well known.

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The Memphis-born Mr. Harrison, who is expected to retire from CP in 2017, has been railroading since 1964. A former CEO of rival Canadian National Railway, he was parachuted into the top job at CP in 2012 by hedge fund Pershing Square Capital, which made a big investment and waged a campaign to change the board at what was North America's poorest performing railway.

Since then, Mr. Harrison has slashed costs and jobs and boosted the company's efficiency. Investors have enjoyed the ride, watching CP's share price on the TSX more than triple to $234 under Mr. Harrison's leadership. But the market has been waiting for signs Mr. Harrison can boost revenue, add customers and build a bigger rail company.

Under the plan CP outlined on Thursday in White Plains, faster service and train speeds were the keys to doubling profit and boosting annual revenue by 50 per cent to $10-billion by 2018. In presentations to analysts and investors, CP executives outlined plans to upgrade terminals, install new control centres and upgrade some tracks to increase average train speeds by one or two miles per hour, up from the current 19 mph, or 30 kilometres per hour.

In the interview with The Globe and Mail, Mr. Harrison said train speed has nothing to do with safety, and that he would never compromise safety in the interest of profits.

"I hope we never could be accused of compromising safety in the interests of the bottom line," he said. "I don't think that in all of my experience, and I've got a little bit, that running 30 miles an hour is a lot safer than 40 miles an hour. We have the ability with the appropriate infrastructure to move those commodities at the appropriate speed and do it very safely."

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