CN Profits Soar While Derailment Impacts Escalate
Canadian National Railway shareholders received record revenues based on recently-announced third-quarter earnings that rose 8%. Revenues for the increasing shipment of petroleum and chemicals rose by a whopping 17% (Financial Post).
While this is great news for shareholders of CN stock, CN and other rail company derailments, explosions, fires and spills of petroleum and other hazardous products are causing loss of human life, millions of dollars in damages, and untold damages to the environment. Overall rail safety is being questioned across Canada by municipal governments (e.g., Battlefords News-Optimist), provincial governments, federal opposition parties, rail safety experts, environmental organizations, as well as residents and businesses located near rail lines.
One of the more recent studies on rail safety, conducted by the Canadian Centre for Policy Alternatives (CCPA), blames deregulation and poor corporate oversight for weakening rail safety that has resulted in many recent major derailments (Edmonton Journal, Financial Post). In response to intense lobbying pressure from CN, CP and other Canadian rail companies, the federal government started deregulating the rail industry 30 years ago, to the point where the industry today regulates itself with either no or very limited oversight by the federal government. The Railway Association of Canada, an industry lobby group, has been lobbying the federal government “to assure them that current regulations for dangerous goods transportation are sufficient”. The CCPA report criticizes the federal government for its laissez-faire attitude toward rail safety, including allowing rail companies to set and monitor their own safety procedures.
The report indicates the recent spate of derailments comes on the heels of a “wild-west boom” in unconventional oil production, including tar sands from Alberta and shale oil from North Dakota. While shipment of oil by rail has been skyrocketing from a few thousand barrels/day in 2009 to 270,000 barrels/day in 2012, the federal government has reduced its budget for rail safety by 19% over the past 4 years, including cutting its budget for the Dangerous Goods division by a million dollars.
At the same time, past CN employees are making the following allegations against the Montreal-based rail giant: criminal conduct by defrauding shareholders, manipulating data to boost CN’s efficiency and share price, retaliation against whistleblowers who work for CN, not reporting derailments and collisions (which are safety performance measures), billing other companies for work CN never did, using partly worn material on new projects to save cost, CN Police lying under oath and unduly influenced by CN corporate, and moving money from one account to another. These allegations, included in lawsuits against CN, have not yet been proven in court.
So…while CN’s profits rise and CN’s shareholders rub their hands in glee, rail safety has been seriously compromised, and past CN employees allege that the corporation has been hoodwinking its shareholders with manipulated performance data and other unethical practices.