(The following story by Monte Stewart appeared on the Business Edge website on October 5.)
OTTAWA — Environmentalists and corporate-responsibility advocates are calling for CN Rail to change its business practices in the wake of several major train derailments since 2005.
CN was part of a recently concluded review of the federal Railway Safety Act, which included public consultation sessions across Canada. The company also faces charges in relation to a 2005 derailment and spill of toxic caustic soda that killed an estimated 500,000 fish in the Cheakamus River near Squamish, B.C.
“Obviously, when we’re having situations where we’re having spills and collisions happening throughout the province, something needs to be addressed,” says Paul Adams, executive director of the B.C. Wildlife Federation.
But CN spokesman Jim Feeny says CN’s safety record is much better than people think. He contends public criticism is based on perception rather than actual data, and derailments have actually been on the decline over the past two decades.
“The fact is, over time, accidents on CN are reducing,” says Feeny. “Do we get a bad month or a bad year from time to time? Yes, it does happen, as happened in 2005. But what you have to do is look at the trends over time to really get the true picture on what is happening to safety at CN.”
While the recent federal review was in progress, CN had to deal with a collision of two trains Aug. 4 near Prince George, B.C., in which petroleum products were spilled along a river bank and railcars caught fire.
Another derailment happened Sept. 17 on the company’s northern B.C. mainline servicing the port of Prince Rupert and involved a westbound grain train heading to the Ridley grain terminal.
A CN spokeswoman said 29 of 99 grain cars came off the tracks about 48 kilometres east of Terrace.
“I think it is time for the government to take some serious steps (and launch) a full public inquiry into the safety practices of CN Rail,” said B.C. New Democrat MLA Maurine Karagianis, the opposition transportation critic.
“The safety practices of CN Rail, I think at this point, need a full, public investigation.”
The former Crown corporation has also come under criticism for an accident next to Wabumun Lake near Edmonton in 2005, when 43 cars derailed and 700,000 litres of bunker and pole-treating oil were spilled.
In that case, Alberta Environment charged CN with failing to take all reasonable measures to remedy and confine the spill.
Adams says he lacks the expertise to say how CN should change its practices. But if the company does not change its ways, he adds, Ottawa should step in to ensure that proper safety protocols are in place – including setting limits on length of trains and monitoring maintenance of trains and tracks.
Transportation Safety Board (TSB) figures show total train accidents in Canada between July of 2006 and July of this year declined 8.4 per cent to 618 from 675. But derailments involving three or more cars rose 29.26 per cent to 41 from 29.
Meanwhile, main-track derailments involving dangerous goods more than doubled to 19 from eight.
“(CN’s safety record) has obviously been in question over the last couple of years with the number of wrecks that have happened on the BC Rail system,” says Adams. “People need to be concerned when it seems that railcars – which are exceedingly lengthy – are travelling through sensitive habitat and carrying dangerous loads.”
CN faces five joint federal-provincial charges in relation to the Cheakamus spill, which could result in fines of more than $3 million.
A TSB report into that spill blamed human error, poor supervision and the use of long trains. “This investigation revealed significant safety issues related to train operations and the use of technology,” the report said.
After purchasing BC Rail, the TSB found, CN started running fewer but longer trains as part of a bid to use fewer crew. However, Feeny says longer trains are not the issue.
“We believe, and our research and our assessments show, that train length is not a causative factor (in) accidents,” he says.
Adams says he’s pleased to hear the company will be held accountable for damage caused by the caustic soda spill. He adds the charges set a precedent for other companies by having financial obligations for the cleanup met by CN.
Karim Jamal, a University of Alberta accounting professor who evaluates corporate responsibility, says CN is paying more attention to the bottom line and public relations than the environment.
“They’re just constantly pressing to move more goods at less cost,” says Jamal. “My view is that safety and the environment and all of those are getting rounded off as just a cost of doing business.
“Either they’ll have to change their view or shareholders will have to put some pressure on them to change their view – or the government will have to do it.”
Jamal also says he fears cleanup costs do not make a big enough dent in CN’s bottom line, and calls for the railway industry as a whole to introduce best practices that all firms can follow.
“If CN becomes much more efficient because it’s pushing these practices, that could put pressure on CP (Rail) and everybody else.”
Since 2004, CN’s net earnings have grown 41.7 per cent to $2.1 billion from $1.5 billion and earnings per share have jumped 46 per cent. Between June 2005 and June 2006, net earnings fell about five per cent to $1.83 billion from $1.93 billion.
Dermot Foley, vice-president of strategic analysis for Vancouver-based Inhance Mutual Funds, says CN is in danger of damaging valuable customer relationships in an integrated North American rail system if it does not change the way it operates.
He says CN should be running shorter trains on north-south lines formerly operated by BC Rail, use more employees to help trains travel on steeper terrain along those lines and boost the number of inspections to ensure that accidents do not happen again.
“Part of the way that they’ve delivered profit to shareholders is by running more freight by running longer trains,” says Foley. “I don’t think that’s sustainable. They actually have to start thinking about running shorter trains (and) using more people. I’m sure, as shareholders, we’d be quite happy with the returns.”
Inhance, which owns 14,000 shares in CN, strives to invest only in companies that balance the interests of shareholders, customers, employees and the community.
The firm also evaluates how organizations operate in relation to the environment, increased social concerns and changing shareholder demands.
During this year’s annual meeting, Foley supported a proposal by Vancouver-based Ethical Funds Inc. that CN president and CEO Hunter Harrison’s compensation be tied to the company’s safety record. But the resolution was defeated by shareholders.
He says CN must also place a lot more value on long-term employees who spent their whole careers working on the rails.
Often, he says, when looking for higher productivity and financial efficiency, CN offers early-retirement packages to senior employees because they get paid the most, have the most time off and receive the highest benefits. But the introduction of younger and cheaper employees comes at the expense of experience.
“There’s (a loss of) deep experience and knowledge that you don’t necessarily get from reading a manual on how to run a train,” says Foley.
Since 2005, CN has introduced a safety action plan as part of its overall safety-management system and reduced accidents by 20 per cent.
CN spokesman Feeny says no mode of transportation has been able to eliminate all accidents.
“What we’re trying to do on all of our network is to run traffic as efficiently and as safely as possible,” says Feeny.
He also defends the use of fewer crew and the company’s attitude toward older employees.
“In some of the incidents, the employees involved, some were people who have spent their entire careers with CN,” says Feeny. “Others were people who came to us from other railroads, including BC Rail, so we do listen to people who are out staffing the trains.
“But we have our standards and we require all employees, no matter what railroad they may have come to us from, to work to those standards and to follow those rules and procedures.”
CN made presentations during the federal review of the Railway Safety Act.
Feeny says the company’s position is that the current structure of the act is working and it does not need to be changed.