April 4, 2014 / 2:55 PM / 6 years ago

UPDATE 2-Canada can move faster than U.S. on oil rail cars -minister

(Adds comments on timetable, and on Canadian Pacific requests)

By Allison Martell

TORONTO, April 4 (Reuters) - Canada can move faster than the United States to stop the use of older rail tanker cars for carrying crude oil, Transport Minister Lisa Raitt said on Friday, adding that the government is under pressure after last July’s fiery derailment in Quebec that killed 47 people.

Raitt has stressed that the rail industry is deeply integrated across Canada and the United States, making it difficult to make unilateral regulatory changes, though she implied on Friday that Canada may take at least some steps on its own.

“It really is about making sure that we have an effort that makes sense on a North American basis, understanding what the timeline is in the United States, which is longer than ours,” she told reporters in Toronto.

“We have the ability to move more quickly in Canada by virtue of our system, and we don’t have a prescribed method of rule-making that they do in the United States.”

She did not make clear whether she was talking about requiring an earlier phase-out of the older tanker cars, the DOT-111 model, than in the United States, or allowing and encouraging rail and oil companies to take steps to discourage their use.

The older DOT-111 tank cars, built before October 2011, are considered more prone to puncture than newer models. The train that derailed in Quebec in last July’s disaster, which leveled the heart of the town of Lac-Megantic, was comprised of DOT-111 tankers.

Since October 2011, tank cars have been built to a safer standard known as the CPC 1232 design, with reinforced outer shells and protective shields. American and Canadian officials have been working on an even tougher standard, but Canadian Pacific Railway President Keith Creel said this process could take 12 to 18 months to finish.

The Transportation Safety Board of Canada and the two big Canadian railways are exerting pressure for a speedy phase-out of the DOT-111s. The railroads are required to haul old cars loaded by shippers as long as the equipment conforms to regulations.

A reporter asked Raitt how Canada could phase tankers out more quickly than in the United States, given the industry’s integration, and she pointed to actions by individual companies.

She referred to a decision by Irving Oil, a closely held Canadian refiner, to stop using the older DOT-111s by April 30.

“It’s already happening, right now, because Irving has already said they’re not going to accept anything that isn’t their 1232s,” Raitt said.

Canada’s two dominant railroads, Canadian National Railway Co and Canadian Pacific, have both indicated they plan to move away from DOT-111s, she said.

“That is exactly one of the issues that we are grappling with right now: how to do this on a North American basis that makes sense,” she said.

“But remember too ... one thing we have to balance here: Our country suffered a great tragedy in Lac-Megantic, and we have to be mindful that we need to respond to that, and ensure that Canadians are protected and that they’re safe.”

Raitt has promised that the government will formally respond on April 23 to recommendations from the Transportation Safety Board stemming from the Lac-Megantic tragedy.

“Until then I’m not going to be talking about timelines other than to say - I’ve already said - that 10 years is not acceptable, so five years I’ve already said as well is probably high,” she said, referring to the phase-out of the older cars.

One area where Canada might be able to move independently of the United States without setting out a timetable is to change regulations so that the railways can increase surcharges for use of the older DOT-111s.

CP has started putting a $325-per-car surcharge on the DOT-111s but it says that because of current regulations, it would lose in arbitration in Canada if it charged prohibitive rates to force the DOT-111s out.

“I hear what CP is saying, but we’re not at the point where we’re talking about the plan. We’re going to continue to develop the plan, and I have a hard deadline of April 23, so we’ll see then,” Raitt said.

Canadian Pacific’s Creel also said that regulations in both Canada and the United States prevent his railroad requiring shippers to carry adequate insurance. (Writing by Randall Palmer; Editing by Frank McGurty; and Peter Galloway)

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