Ottawa stands firm on rail’s crude oil obligations

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Amid a handful of recent fiery train derailments in Canada and the United States, the federal government said it is not considering changes to the laws that require rail companies to haul crude oil and other flammable goods.

"Transport Canada does not have any plans to review the common carrier obligations at this time," Zach Segal, spokesman for Transport Minister Lisa Raitt, said.

Hunter Harrison, chief executive of Canadian Pacific Railway Ltd., this week portrayed the rail company as a reluctant carrier of crude oil and other dangerous goods. But he noted railways are required to service all customers, provided their goods are legal and in approved containers, under the so-called common carrier obligation.

"We don't get to choose what we haul. Whatever is tendered to us, we by law have to haul. Do I want to haul to some of the places I have to haul it? No. But I'm the wrong person to talk to. Somebody should talk to Ottawa. It is a legal obligation," he said in a Toronto speech.

Amid a sharp rise in oil shipments by rail in the past few years, there have a been several fiery accidents, including three in the past three weeks.

A BNSF train hauling Bakken oil that derailed late Thursday near Chicago was still burning on Friday afternoon.

The 2013 explosion of an oil train in Lac-Mégantic, Que., killed 47 people and destroyed the downtown. That tragedy spurred regulators to draft new standards for tank cars, impose speed limits on oil trains and require railways to carry minimum levels of insurance. Ottawa last year ordered the older tank cars off the rails and said it would phase out others. The U.S. and Canadian governments are finalizing new standards for tank cars intended to make them less likely to puncture and explode in a derailment. The new tank car standards are expected to be introduced this spring.

The plunge in crude prices to about $50 (U.S.) a barrel from $100 last summer has dampened the growth in the volume of crude on the railroads. Moving a barrel by rail can cost as much as $22, which is about twice what it costs to ship by pipeline.

On Friday, the National Energy Board said exports by rail to the United States dipped by 5 per cent to 173,000 barrels a day in the fourth quarter compared with the previous quarter. Year over year, crude-by-rail shipments were up by 16 per cent in the final three months of the year.

Ottawa last week introduced legislation that will require shippers of oil in Canada to pay into a fund that will cover cleanup and damages from any derailment.

The Railway Association of Canada, which represents the country's large and small carriers, has told the federal government the fee should be paid by companies that ship chlorine and other dangerous goods, not just oil.

The RAC also wants railways to have the right to refuse to carry dangerous goods.

Mr. Harrison said the company has "shared with" regulators in Ottawa and Washington two ideas it believes would lead to safer transport of dangerous goods: routing protocol, in which some trains avoid heavily populated areas such as Chicago or Toronto; and ensuring dangerous goods are sourced locally if possible, to avoid moving them over long distance by rail.

Mr. Harrison said CP's board of directors talked about getting out of the crude oil business, but was given legal advice that it could not do so.

"I was probably going to be the one who would have to go to jail, so right now we're still [hauling oil]. But that needs to be addressed," he said in a televised interview.

Agreeing on new routes for trains containing dangerous goods would be a massive undertaking for railways, regulators and the companies that ship goods, and would no doubt be unpopular with communities along railroads selected to handle rail cars that could explode or spill toxins in a derailment.