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Published August 18, 2014, 10:29 AM

Canadian Pacific's Harrison: We will get better

Hunter Harrison, CEO of Canadian Pacific Railway, showed his pride and disappointment in his railroad’s ability to move North Dakota grain in a meeting Aug. 11 with shippers and two U.S. senators in Minot.

By: Mikkel Pates, Agweek

MINOT, N.D. — Hunter Harrison, CEO of Canadian Pacific Railway, showed his pride and disappointment in his railroad’s ability to move North Dakota grain in a meeting Aug. 11 with shippers and two U.S. senators in Minot.

But Harrison also showed a fiery, defiant side — defending against what he said are sometimes inaccurate or misplaced reports of his railroad’s shortcomings.

Harrison denied that his elevator was behind 22,000 cars as reports to the U.S. Surface Transportation Board indicate. The STB reports show only 5 percent improvement since June, and cars are still waiting 10.5 weeks.

Harrison told North Dakotans his railroad might be “effectively caught up,” in its ag orders, despite reports to the contrary. With the company’s existing open order system that allows double-booking with consequences, it is impossible to know, he said.

Harrison noted his railroad only handles 20 to 25 percent of North Dakota’s grain in a normal year, so the majority of the problem is more directly connected to Burlington Northern Santa Fe Railway, which met recently with the congressional delegation and shippers.

New ordering plan

CP is in the process of creating a new ordering system that prevents double-ordering and institutes new penalties — both for grain elevators and for the railroad — if either fails to perform.

“There has to be some skin in the game,” he said. CP has been working on the system since early this summer, and elevator operators in the meeting said they’d been told the system was to have taken effect around Aug. 1.

Harrison said the system is dealing with two large customers in the state to determine whether they’ll accept the changes that allow for penalties on outstanding trains.

“Hopefully these contracts can get resolved, and if not we’ll move to Plan B,” Harrison said.

“I promise you personally … we will get this situation better, and we will develop some forum, newsletter or something” to keep shippers and others informed.

Sen. John Hoeven, R-N.D., said officials need more meaningful numbers and then a short- and long-term plan to improve things.

Harrison said his railroad has plans to invest $150 million in infrastructure in the next three years, but said part of that is allocated to safer train-crossing technology that was put in place after a railroad incident in California caused by human error.

But he also said his company is not short of rails or equipment, but sometimes short of people, in part, he said, because of competition with the oil industry. He was optimistic that a labor contract can be ratified soon that might relieve some of the problems.

Problems are real

Sen. Heidi Heitkamp, D-N.D., who has been pressing for better communications on the rail issues, said the problems are real, and have big impacts. She referenced a North Dakota State University study that indicated farmers in the state had lost $66 million because of increased “basis” and other market consequences. Heitkamp said she’s confident those losses since the report have climbed above $100 million. The most important thing for farmers is the ability to market grain, she said.

“We have got to have predictability,” Heitkamp said.

Dan Wogsland, executive director of the North Dakota Grain Growers Association, said the railroads haven’t moved 35 million bushels of last year’s 235-million-bushel spring wheat crop, adding that this year’s crop is estimated at 267 million bushels.

Personal impact

Harrison appeared moved by a statement from John Berthhold, vice president of Walhalla Bean in Grand Forks, who talked about losing markets.

“When I hear the young man say he hasn’t had a single car shipment since February, that registers,” he said, referring to Berthold, and looking him in the eye. “Those cars are coming. There might not be anything (else) moving in North Dakota, but those cars are coming. Get ready.”

He said he’d personally take charge of single-car shipping. Berthold responded that he can’t take 38 cars in a single day.

Among the other shippers with specific complaints was Keith Deutsch, a Plaza, N.D., farmer and director of the Plaza-Makoti Equity Elevator, who said his co-op hasn’t seen a rail car since May 24.

“We’ve only gotten 80 cars since Jan. 1,” he said.

‘The truth hurts’

“I don’t like what I hear,” Harrison said. “It’s because sometimes the truth hurts. We base a lot of our company values on service, and this does not fit what we’d like to hear, in spite of weather and all of that stuff. It’s in our interest to get a lot of grain moved here.”

Harrison noted the Canadian government had imposed $100,000 per day fines if his railroad failed to move at least 500,000 tons of 5,500 rail cars of domestic grain per week.

Rep. Kevin Cramer, R-N.D., did not attend the Minot meeting but on Aug. 12 said he has informed Canadian officials he is considering pushing for response to the mandates and penalties if they slow CP’s performance in moving U.S. grains and products.

“Unilateral parochial endeavors such as this potentially undermine our entire integrated system,” Cramer wrote in a letter to Gary Doer, Canadian ambassador to the U.S. Cramer said he’d contacted the STB, the U.S. Department of Agriculture, the U.S. Department of Transportation and the U.S. Trade representative to “help facilitate an appropriate response in order to rectify this issue.”

On Aug. 12, State Sen. George Sinner called on the STB to use its emergency powers to alleviate the rail backlog, saying the delays have already cost farmers tens of millions of dollars.

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