February 15, 2015 / 7:48 PM / 3 years ago

UPDATE 1-Canada readies back-to-work legislation as CP rail workers strike

(Adds grain shipper, trader comments)

By Amran Abocar

TORONTO, Feb 15 (Reuters) - Canadian Pacific Railway Ltd prepared to operate a reduced freight schedule run by its managers on Sunday, after talks on a new contract broke down and more than 3,000 train engineers and conductors walked off the job.

Canada’s second-largest railway and the Teamsters Canada Rail Conference could not agree on scheduling and rest time before a midnight deadline passed. The railway reached a deal with a second union, Unifor, which represents safety and maintenance workers.

The strike will affect automakers, crude-by-rail and grain shipments and the Port of Metro Vancouver. Commuters in Montreal will also feel the effects, since CP operates some commuter trains in Canada’s second largest city. CP workers in the U.S., where the railway has a substantial network, are not on strike.

Canada’s Labour Minister Kellie Leitch, who intervened in the talks on Friday to try to stave off the strike, said she was “incredibly disappointed” that the union failed to reach an agreement with the Calgary-based company, adding “the union continually stifled progress.”

“Our government will review all available options to end any work-stoppage expediently, up to and including the introduction of legislation in Parliament,” Leitch said in a statement.

The Canadian government began laying the groundwork to introduce back-to-work legislation last week, putting it on Parliament’s notice paper for Monday, which means it could pass into law soon after the strike.

In recent years, the government has intervened or threatened to intervene in several major labor disputes involving transportation.

Legislation is scheduled to be introduced on Monday which, if passed, could force employees back to work within days.

Jarrett Zielinski, president and CEO of Torq Energy Logistics Ltd, which operates crude-by-rail loading facilities in Western Canada, said he expected the federal government to step in and take action.

“We are as exposed as anyone else and thus providing our customers access to both Canadian class one railroads mitigates some of the risk associated with that exposure,” Zielinski said before the strike was called.

“However, with U.S. crude oil inventories at record levels and pipeline takeaway constraints mounting, we foresee increased demand for (crude by rail) services.”

Torq’s main terminal in Unity, Saskatchewan, is connected to both CP and Canadian National Railway, Canada’s largest rail company. CN reached a deal with the Teamsters on Saturday and is in talks with Unifor but does not face a strike deadline.

Asked earlier about a potential CP strike, oil traders in Calgary said it would only have a big impact on crude shipments if it dragged on for an extended period of time.

Loading facilities that are connected to both CP and CN rail will be less affected.

Crude-by-rail only makes up a small percentage of the more than 3 million barrels per day of crude Canada exports to the United States every day but rail capacity has helped reduce price volatility by easing congestion on pipelines.

Grain handlers are urging Ottawa to use any means available to quickly end the strike, including back-to-work legislation, said Wade Sobkowich, executive director of Western Grain Elevator Association, whose members include Cargill Ltd , Richardson International and Viterra Inc.

“Grain shippers on CP lines will have no options in their ability to supply international customers,” Sobkowich said.

The costs from delayed shipments, lost sales and vessel demurrage will affect all players in the grain transportation system, he said.

Canada is the world’s second-largest wheat exporter and the biggest canola shipper. (Additional reporting by Nia Williams in Calgary and Rod Nickel in Winnipeg; Editing by Phil Berlowitz)

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