POLITICS

CP Rail customers looking at alternatives on Day 2 of Teamsters strike

05/24/2012 11:54 EDT | Updated 07/24/2012 05:12 EDT
CALGARY - Companies that rely on Canadian Pacific Railway to move their products across the country were looking at their alternatives on Day 2 of a walkout by 4,800 employees.

CP (TSX:CP) suspended all freight shipments in Canada — affecting oil, coal, automotive, fertilizer and lumber industries, among others — after workers represented by the Teamsters Canada Rail Conference went on strike early Wednesday.

Cenovus Energy Inc. (TSX:CVE) moves about 2,000 barrels of oil per day by rail from its Bakken fields in Saskatchewan. That's not a lot for a company that produced 156,850 barrels per day during its most recent quarter.

Still, the oil company says it has felt a hit due to the CP strike.

"We have been affected," spokeswoman Jessica Wilkinson said Thursday.

"In the meantime, we're looking to secure pipeline capacity to move that oil and we're confident we're going to get the pipeline capacity."

Other industries aren't as fortunate when it comes to having a Plan B.

Fertilizer producers have few, if any, fallback options, said transportation consultant Tom Maville, who works with the Canadian Fertilizer Institute.

Last year 28 million tonnes of fertilizer were produced in Canada, most of which was transported to market by rail.

Of that, about eight million tonnes of potash moved from 10 mines in Saskatchewan to the Port of Vancouver along Canadian Pacific's tracks.

Potash trains can stretch more than two kilometres in length. It would take two and a half trucks to move what a single railcar can, said Maville.

"You'd need thousands of trucks, and they'd have to be specialized. They're just not there."

Maville said there's limited storage capacity at the potash mines and at the ports, especially since it's the height of Canada's growing season.

"In very short time there's going to be nowhere to put the product, which means you shut down mines, you close down plants and you lay off people," he said.

"That is a worst-case scenario, but that is the reality of what could happen here."

CP has a contract with a company called Canpotex, which markets potash internationally on behalf of the three biggest Saskatchewan producers. One of those is Potash Corp. of Saskatchewan (TSX:POT).

"We're in an incredibly busy period with Canpotex shipments around the world, and this will certainly have a short-term impact on our ability to move product," said company spokesman Bill Johnson.

"It is our sincere hope that CP will return to work very soon. We would not want to see this strike go on for any extended period of time."

Saskatchewan's Minister of Energy and Resources wrote a letter to federal Labour Minister Lisa Raitt on Thursday urging a quick end to the work stoppage.

"CP's rail network is critical in moving Saskatchewan grain, oil, timber and minerals to markets all over the world," wrote Bill Boyd.

"Without this connection, jobs and investment are at significant risk, and so is our international reputation as a reliable supplier of valuable products."

Raitt has said she's ready to introduce back-to-work legislation as soon as Monday if the two sides can't come to an agreement.

Boyd said it's best if CP and the Teamsters reach a deal on their own, but urged Raitt to step in if they don't.

"We want to see them move with back-to-work legislation as soon as possible — if we do not see successful negotiations within hours," he told reporters in Regina.

In an interview with Business News Network, Raitt said she'll assess the situation on Monday to decide whether it's necessary to force an end to the strike.

"We actually don't quite know exactly what kind of effect it's going to have on the economy. You can see that there are some shippers out there who are looking at alternative methods in order to send their goods and other people do have stockpiles ready to go," she said.

"So it's a matter of how long these other third parties can hold out while the parties are at the table negotiating themselves, and if we do see that there's an imbalance, we are prepared and we have the ability to act in a quick manner. But right now, they should be trying to do their deals."

The federal New Democrats say federal intervention is unacceptable and that the dispute should only be resolved through negotiation.

On Thursday, the Grain Growers of Canada wrote an open letter to Opposition leader Thomas Mulcair asking for his party's support in imposing back-to-work legislation.

"We do recognize and appreciate your party's concern for labour rights, a fair process for resolving collective agreements and for negotiating tactics up to and including the right to strike," the group said.

"However, disruptions to rail service directly impact farm families and farm income. Farmers have just incurred huge costs for seed, fertilizer, fuel and the other inputs needed to put a crop in the ground and those bills are due very soon. Farmers count on delivering some of their grain at this time of year for that cash flow."