Merci. Bonjour.
My name is Marty Cove. I'm the manager of logistics for Canexus Corporation. We're a medium-sized chemical manufacturer headquartered in Calgary, and we have plants in B.C., Manitoba, and Quebec. We produce chlorine, hydrochloric acid, caustic soda, and sodium chlorate. These chemicals are primarily used in the water treatment, oil and gas, and pulp and paper industries. We also operate a crude oil railcar loading facility just northeast of Edmonton.
All of the chemicals Canexus ships are dangerous goods. In addition, Canexus leases a fleet of about 2,200 railcars, of which about 1,500 are tank cars, and about 1,100 of those are the DOT-111s that you have been talking about. Of the 1,100 DOT-111s that are in our fleet, however, almost 900 are in hydrochloric acid and caustic soda service, not crude oil.
As you can imagine, with a fleet of this size, about 90% of what we produce moves by rail. So we feel that we have a vested interest in a number of the rail safety issues the committee is exploring today. Accordingly, I'd like to thank the committee members for inviting me here to speak today in conjunction with the CIAC.
If you'll bear with me, I wanted to make two points before I turn the floor back to the chairman for questions.
First, I note the committee members have been asking about safety management systems. Canexus, as a member of CIAC, espouses the principles of responsible care, which my colleague Fiona has spoken about. We often describe responsible care as an ethic exemplified by either doing the right thing or going beyond what is required, and to a large extent it is the means by which we go about securing a social licence to manufacture the chemicals we do. Our safety management system, if you will, consists of a number of related parts covering manufacturing, research and development, warehousing, product stewardship, and transportation, to name a few.
From the transportation perspective, and without getting too far into the detail, our transportation safety management system consists of about seven subcomponents including hazard and risk assessment, carrier selection, emergency response, security, incident reporting and analysis, regulatory compliance, and community outreach. Most of the seven subcomponents are made up of policies, procedures, processes, checklists, databases, training methodologies, decision matrices, assessments, and evaluations.
The integrity of our management systems are re-verified every three years by a CIAC audit team who examines our systems for evidence of a robust management system, holistic integrity, and to ensure that we are constantly improving.
I thought I'd try to bridge the gap between the theory of responsible care and some practical examples to help illustrate how responsible care works at Canexus, and I have two examples.
In the first, in about 2007 Canexus recognized that there were a number of parties within the transportation industry who believed that with improvements in engineering and construction methods, a new TIH—which is toxic inhalation hazard—car design could provide a potentially safer means of transportation. However, the new car was roughly twice as expensive as the existing car design. Despite these costs, Canexus put the money where its mouth was and began a program to convert all of its chlorine cars to the new safer design. At present, almost 80% of our chlorine fleet is made up of the new cars, and we plan to complete our conversion program within the next two years. By the way, the Canexus chlorine cars are U.S. DOT-105J600, if you want the precise technology, so they're not DOT-111s.
A second example relates to the routing of chlorine. Several years ago the railways began to express concerns to us about the risk of moving chlorine, and especially the added risk of handling chlorine that other railroads could more safely handle or might more effectively handle. After consultation with the railways, Canexus made a decision to modify its transportation decisions to ensure that we minimize the number of rail carriers handling a shipment, and to work with all rail carriers to ensure the routing of our traffic over its lines took into account a number of safety criteria. What this meant was that our costs of shipping increased, and in some cases, quite substantially.
Secondly, I'd like to speak briefly about liability, a matter which has come up a number of times in the committee hearings to date. Mr. Creel from CP stated in his testimony that the only way to provide additional liabilities is for shippers of those products to share in that liability. From my reading of it, he leaves one with the impression that shippers don't bear any liability today, and in fact, nothing could be further from the truth.
Shippers are responsible for loading the railcars safely. Shippers must ensure that the railcar has been properly inspected and maintained prior to shipment. Shippers must provide a railcar that has the right markings. Shippers must provide the correct billing to the railways and if any of these factors and others contribute to a product release, the shipper bears the liability for that incident. In addition, I hope my foregoing examples demonstrate in a concrete way how a shipper may take on a greater share of the risk than is immediately apparent.
Conversely, it's the railway that bears liability if a product release occurs while in its care, custody, and control. In the last three major TIH incidents, all three resulted from railway causes. The shipper doesn't decide how to maintain the track, which crossings should be protected, how to police trespassing, which employees to hire, how to train them, what shift work and hours those employees are asked to work, whether to install fencing, nor on a myriad of other factors that may play a role in a derailment and subsequent release.
The railways would have the committee members believe that because they cannot decline to handle TIH shipments, the railways should somehow be excused from bearing certain liabilities while the railcar is in their possession. If the railways struggle to protect themselves from those liabilities, how could one expect that they wouldn't be even slightly less zealous in protecting the shipper from the same liabilities? Is there even a small chance that TIH shipment safety would be compromised?
I make my preceding comments not to try to argue that change isn't necessary. I think the unfortunate events related to Lac-Mégantic demonstrate that change is not only necessary, it's inevitable. Canexus recognizes the conundrum short lines, in particular, face in gaining access to large insurance caps. We would merely point out that the devil is in the details. My two examples above demonstrate where there may already be shared responsibility between the shipper and the railway to minimize risk, and therefore, insurance premiums.
Another example of the complexities of the issue is this. We would argue that our chlorine freight rates today already include a substantial risk payment. CP charges us, in ballpark terms, about $25,000 to move a carload of chlorine from North Vancouver, where it's manufactured, to Minneapolis. This is easily double, or perhaps triple, at least, what non-TIH commodity charges would be over the same origin-destination pair. Could we expect the railways to give us this premium back if we agreed to fund a pooled insurance arrangement, and if not, why not?
I won't pretend to have the answers for you today to this question, but Canexus is willing to discuss potential solutions so that we can be part of a solution and not part of the problem. Again, I'm merely pointing out that this is isn't an easy solution and there are many considerations to take into account.
Thank you.
