Ottawa’s tin ear on energy policy

Why Canada is rushing to lead the charge on phasing out potentially dangerous crude-carrying rail cars
Transport Minister Lisa Raitt announces new railway safety measures during a news conference on Wednesday, April 23, 2014 in Ottawa. THE CANADIAN PRESS/Adrian Wyld
Several people were missing after four tank cars of petroleum products exploded in the middle of a small town in the Canadian province of Quebec early on Saturday in a fiery blast that destroyed dozens of buildings. (Mathieu Belanger/Reuters)
Rail cars carrying crude oil burn in Lac-Megantic. (Mathieu Belanger/Reuters)

Despite its “emerging energy superpower” talk, Ottawa has demonstrated a remarkably tin ear when it comes to understanding what foreign buyers of our oil and gas actually want from us: a cheap, reliable source of energy that people can feel good about, too.

For all our technological advances in figuring out ways to profitably suck gooey bitumen from the Alberta tar sands, the country has struggled mightily to convince people that we’re able to manage such a massive industry without ruining the planet in the process. It began with Canada’s decision to thumb its nose at the Kyoto accord back in 2011. While there were good reasons for abandoning the historic pact, the way Ottawa went about it left many questioning our commitment to the environment, not to mention a pledge to develop carbon-heavy assets like the oil sands “responsibly.” As a result, we’ve arrived in a bizarre place where Washington is hesitant to approve a key piece of North American energy infrastructure—the Keystone XL pipeline—for fear of incurring the wrath of environmentally minded (but often still SUV-loving) American voters.

So it’s little surprise, then, that Ottawa is keen to establish itself as the good guy on another energy-related issue: the shipment of oil by rail. On Wednesday, Transport Minister Lisa Raitt said Canada would take the lead on phasing out older, puncture-prone DOT-111 tanker cars that have been fingered as contributing to several recent explosive derailments, including the one that razed the town of Lac-Megantic, Que. last year, killing 47. While the oil involved in that crash originated in North Dakota’s shale deposits, crude shipments by rail have ballooned on both side of the border in recent years—mostly because of a lack of pipeline capacity.

Raitt said the industry has three years to phase out or upgrade the older DOT-111 tank cars that are being used to carry crude oil or ethanol. The design of the cars has been singled out by safety authorities as being a contributor to firey crashes going back to the 1990s. All together, Raitt said there are about 65,000 tank cars in North America that could be affected by the new rules, as many as one-third of which are used in Canada. About 5,000 of the most dangerous older cars—ones that lack continuous reinforcement on their bottom shells— are to be taken off the rails within 30 days. “We’re leading the continent on it,” Raitt said.

Both Canadian National Railway and Canadian Pacific Railway have already revealed plans to phase out or retrofit their own small fleets of DOT-111 tank cars, with CN saying it would spend about $7 million this year to replace the roughly 40 DOT-111 tank cars it owns outright. According to the industry, most tank cars are owned not by railroads, but by the shippers themselves.

The challenge, however, is that the United States has yet to make a similar commitment. Instead, shippers, railroads, rail car manufacturers and regulators are discussing new standards for tank cars—a process that could take years. While manufacturers agreed in 2011 to begin building new tank cars to higher specifications, it’s likely that the forthcoming standards will go even further.

That raises some potentially thorny questions for a North American rail industry that operates largely without respect to the U.S.-Canadian border. For one thing, it creates the possibility of having two sets of tank car standards in Canada and the U.S. after 2017. It also raises the prospect that Canadian shippers will spend millions to upgrade their fleets only to find those cars outdated once the new U.S. standards come into force.

Raitt waved aside such concerns by expressing confidence in the industry’s ability to meet Ottawa’s “ambitious” timeline, and promising to revisit the issue when new U.S. standards come into place. “We understand the necessity of harmonizing with the U.S.,” she said. “But on this one we can move faster and we will move faster.”

It’s a bold move and, under the circumstances, probably the right one. But, like everything else the federal government has done on the energy file, it would have been far more effective if it was undertaken before there was a crisis in our midst.