Exclusive: Canadian Pacific follows CN, to slap surcharge on older oil tank cars

Fri Feb 14, 2014 5:45pm EST
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By Nia Williams and Solarina Ho

CALGARY/TORONTO (Reuters) - Canadian Pacific Railway Ltd (CP.TO: Quote) is slapping a surcharge on customers who transport crude in older tank cars, following its larger rival in seeking to deter shippers from using the model involved in a series of fiery crashes.

CP Rail will add a $325 "general service tank car safety surcharge" on each car of crude that is shipped in any container other than the CPC 1232 model, effective March 14, it said in a notice issued to customers and seen by Reuters. The CPC 1232 model refers to those manufactured since tougher safety standards were voluntarily adopted in October 2011.

The new tiered pricing scheme comes the same week that Canadian National Railway Co (CNR.TO: Quote) also confirmed it was increasing rates for the older variety of DOT-111 tank cars, whose long history of puncturing in accidents came into public focus after the disastrous crash of a runaway crude train in Lac Megantic, Quebec, last summer, which killed 47 people.

"We are concerned about these cars and their use in transporting crude," CP said in the notice.

"Tank car technologies are available today that significantly reduce the likelihood of a release in the event of an incident. We believe these upgraded tank cars are the best investments to enhance safety."

The CPC 1232 design refers to a circular issued by the American Association of Railroads requiring all crude- and ethanol-carrying cars ordered after October 2011 to have enhanced safety features, including reinforced outer shells and protective shields.

Many in the rail industry are growing increasingly frustrated with U.S. and Canadian regulators who have yet to agree on how and when to impose new tank car standards, even as a growing series of oil-train accidents leaves rail operators facing public outrage and damaged tracks.

CP Rail spokesman Ed Greenberg told Reuters that the firm had introduced a "new rate structure for all crude shipments in any car type other than the safest cars."   Continued...

Canadian Pacific Railway cranes sit idle at the Intermodal Terminal in Vaughan, Ontario May 23, 2012. REUTERS/Mike Cassese