| OTTAWA, April 3
OTTAWA, April 3 Governments should require
companies shipping crude oil by rail to carry enough liability
insurance to make up for shortfalls in coverage carried by
railways, the president of Canada's second-largest rail operator
said on Thursday.
Currently, there are no requirements in Canada for shippers
of oil and other dangerous cargo to carry liability insurance
against accidents, Keith Creel, president and chief operating
officer of Canadian Pacific Railway Ltd , said
after testifying to the House of Commons' transport committee.
The panel was examining the adequacy of Canada's
transportation safety regime after a series of North American
rail derailments and crashes involving shipments of crude oil,
including a horrific accident last July that destroyed the
center of Lac-Megantic, Quebec, killing 47 people.
The accident also exhausted the insurance of Montreal, Maine
& Atlantic, the small railway responsible, which threw it into
bankruptcy protection, leaving federal and provincial
governments to cover the rest of the recovery costs.
"I know for a fact there are certain events that could
happen that could be so catastrophic that you'd not have enough
liability to protect the company," Creel said. "It would be a
going-out-of-business issue for the company. We call it a
As part of its inquiry, the committee is also looking at the
phasing-out of the older version of the DOT-111 tanker cars that
were involved in the Lac-Megantic accident. Experts think the
process could take years to complete despite the heightened
risks presented by rising oil-by-rail shipments.
But Creel told the committee that railroad companies have
reached the limits of the amount of liability coverage they are
able to buy.
"The only other people that can buy additional insurance
would be the shippers of the products. They've not been mandated
to do that. It's not a regulatory requirement," Creel said. "It
needs to happen. This should be a collaborative effort."
He said he had no expectations that such a catastrophe
involving Canadian Pacific was likely, adding it was the safest
railway in North America. Even so, he wanted to be prepared.
Canadian National Railway Co, CP's larger rival,
told the committee it was confident it had enough insurance.
CN has never had any damages anywhere that exhausted the
level of insurance it carries, said Chief Operating Officer Jim
Vena. Pressed about the possibility of a future worst-case
scenario, he said: "We're very comfortable that we're carrying
The Liberals, one of the opposition parties in Parliament,
said they have long advocated for a requirement that shippers
carry insurance, and the opposition New Democratic Party also
said it was worth looking into the issue.
Transport Minister Lisa Raitt said in an emailed statement
that the Conservative government had promised in their policy
speech last October that it would require additional insurance
of the railways as well as the shippers.
"The taxpayer should not have to fund the cost of damages
after an incident," she said, without indicating when she might
act on this.
Creel said that under common carrier rules, railways are
legally required to carry products they might not want to carry,
as long as the containers conformed with government regulations.
He said CP had tried to require adequate shipper insurance
on its own, but was rebuffed.
"You can't do it in the States and you can't do it in
Canada. It's just the regulatory regimes on both sides won't
allow it," Creel said.
CP has started charging a $325-per-car surcharge for hauling
the older DOT-111 tank cars. But Creel said it
would lose in arbitration in Canada if it charged prohibitive
rates to force the DOT-111s out.
The safety issue is only expected to become more urgent as
shipments of oil by rail rapidly expand to keep up with
burgeoning production in Alberta, Saskatchewan and North Dakota
without matching growth in pipeline capacity.
Many in the rail industry are calling for a retrofit or an
aggressive phase-out of these legacy tank cars - mostly owned by
shippers or lessors and not the railways - and estimate the
process could take years to finish.
But some argue regulators could immediately order dangerous
cargo, such as the highly flammable crude that comes out of the
Bakken oil fields, to only be carried in safer tank cars.
Canadian and U.S. officials have been meeting to hammer out
rail safety laws, and Raitt said on Tuesday those discussions
were currently centered around what the next-generation tank car
will look like.
Creel said he guessed it could take the United States 12 to
18 months to come out with new standards, and declined to
estimate when the two sides would mandate a phase-out of the
CN and CP own only a tiny handful of the older rail tank
cars, or less than 1 percent combined of the approximately
92,000 used in North America to transport flammable liquids.
Both CN and CP said their DOT-111 fleet are used to carry
diesel fuel for their own locomotives and not for moving other
products, and said they were working to phase out the cars. CN
has said it is looking at a four-year phase-out plan.
Federal railways carry more than 50 percent of goods
transported by land in Canada, the world's second largest
country by area. The network has 44,000 km (27,300 miles) of
(Additional reporting by Solarina Ho; editing by Frank McGurty
and G Crosse)