CP Rail starting shutdown ahead of possible strike
Embargoes ready to go on shipments
CALGARY • Canadian Pacific Railway says it has begun shutting down train operations ahead of a possible strike set to start Saturday by two unionized workforces.
The company says it has an embargo application in place on shipments going to or from CP’s Canadian locations that will take effect just after midnight on April 21.
Canadian Pacific says it continues to bargain with both the Teamsters Canada Rail Conference and the International Brotherhood of Electrical Workers, which have given strike notices for this Saturday.
A spokesperson for the Teamsters Canada Rail Conference, which represents about 3,000 CP Rail engineers and conductors, said Thursday that less than two days from a strike deadline they had no progress to report.
The potential strike comes at a difficult time for the railway, which is under pressure from shippers to move backed-up grain shipments and supply more trains to the pipeline-constrained oil industry in Western Canada.
Both unions reached a tentative deal with Canadian National Railway Co. last month for new contracts for about 1,700 CN Teamsters workers and over 700 IBEW members.
A strike would come at a critical time for Western Canadian oil producers. The heavy crude they pump is selling for US$16.60 a barrel below the U.S. benchmark, from a discount of more than US$30 in February. Oil flows out of Alberta to the U.S. have improved after pipeline and rail bottlenecks earlier in the year stymied exports.
“Any reduction in rail capacity would not be good,” Kevin Birn, a director at IHS Energy in Calgary, said by phone. “A rail strike would stretch or constrain CP, one of the major rail lines, at a time when it’s most needed.”
New heavy oil production from Suncor Energy Inc.’s Fort Hills mine, combined with reduced pressure on the TransCanada Corp.’s Keystone pipeline after a November spill filled remaining export lines to capacity this year, forcing producers to ship by rail as an alternative. But the rail companies were also constrained by heavy demand for grain shipments and cold winter weather that slowed trains.
While the maintenance shutdowns of oilsands upgraders, including Syncrude Canada Ltd.’s plant near Fort McMurray, combined with rail lines moving “a little more” crude has helped alleviate the logjam, the discount could widen back out to between US$17 and US$19 a barrel once Syncrude resumes operation, Birn said. That assumes that a rail strike doesn’t happen.
CP is the second-biggest rail shipper in Canada after Canadian National
Railway Inc. The carrier shipped 3,488 carloads of petroleum products the week ended April 14, up 28 per cent from a year earlier, company data show.
A RAIL STRIKE WOULD STRETCH OR CONSTRAIN CP ... AT A TIME WHEN IT’S MOST NEEDED. — KEVIN BIRN, IHS ENERGY