CN Rail investing in technology to improve safety, CEO not concerned about NAFTA

Canadian National Railway Co. is investing in technological innovations to improve safety and operations as it grapples with rapidly disruptive changes in the industry.

CN chief executive Luc Jobin told an investor conference gathered in Montreal on Wednesday that the company must take advantage of technological innovations that will help improve supply management, safety, engineering and increase value propositions over time.

“Make no mistake about it, the world CN operates in is definitely evolving. The challenges facing our company are not unique to us or our industry,” Jobin said in a speech to investors. 

“It means some basic applications to reduce manual and clerical work still in our operations today, to more multi-faceted enhancement, such as taking our supply chain performance to the next level with digitalization to increase efficiency, reliability and visibility.” 

CN kicked off its two-day investor conference Tuesday with a showcase of various technologies the railway company is planning on implementing over the next few years to improve efficiencies, capacity, and safety.

The company is currently working with InnoTech Alberta to develop new ways to transport bitumen from Alberta’s oilsands and has filed a patent application for CanaPux, which turns bitumen into a semi-solid, non-hazardous puck-like pellet that doesn’t explode, leak, or sink. 

CN has also spent $500 million of a total $1.2 billion commitment to install positive train control (PTC) technology designed to automatically stop trains before accidents caused by human error occur. PTCs were mandated in the U.S. in 2008, and aim to prevent train-to-train collisions, derailments caused by excessive speed and the passage of trains through track switches left in the wrong position.

Another technological innovation involves managing fatigue for its unionized employees, which make up about 80 per cent of the workforce. The company recently launched a pilot project involving a fitness tracking device called Readiband, which monitors and records employee fatigue and alertness.

Jobin said because the company is taking a gradual approach to the implementation of new technology, changes to the workforce will not be disruptive and “shouldn’t lead to any major discontinuity.” Pressures caused by the introduction of new technology will be alleviated through displacement and retraining, as well as attrition. 

“There’s a natural attrition process which will help us over time cope with some of the changes as automation and more technology gets deployed,” Jobin said. “There is room for some displacement, there is room through attrition … and we feel pretty good that we can work with union leadership and our employees to go through that in a very constructive way.” 

Walter Spracklin, an analyst with RBC Dominion Securities, said in a note to clients that early results of these technological innovations have been encouraging. 

“While we are mindful that some of the technologies are in the pilot phase, the exhibits and presentations we saw on day one of the investor day reaffirm our view that CNR is at the forefront of railroad innovation,” he wrote. 

In his speech to investors, Jobin also dismissed concerns about NAFTA renegotiations, and said it could be a “constructive” time that Canada could take advantage of. 

“While there are clearly rising protectionist tendencies, many trading blocks are so integrated that unwinding is not only impractical, it’s often detrimental to the parties involved,” he said. 

“We do not anticipate it will have a significant impact on the flow of goods between Canada and the U.S. that would fundamentally affect our network.”

Financial Post

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Natural gas production boom has pipeline demand exceeding supply

CALGARY • Natural gas producers want more pipeline space than many midstream companies are offering and have oversubscribed to two new expansion projects in the last week.

TransCanada Corp. announced Wednesday that natural gas producers had bid for more space on a new $2-billion expansion of its Nova pipeline system than was available.

“We had more people in the queue than ultimately signed contracts,” TransCanada president, Canada and Mexico natural gas and energy Karl Johannson said.

Johannson said natural gas production from the prolific Montney, Duvernay and Deep Basin formations is surging and gas reserves in those formations has grown to the point that, “I think people have stopped counting.”

The expansion project will allow gas producers in northwestern Alberta and northeastern B.C. to move an additional 2.6 billion cubic feet of gas per day out of the field and into pricing hubs. It will also allow producers to send 400 million cf/d to markets in California, Nevada and the Pacific Northwest.

TransCanada is already spending $5.1 billion to expand of the Nova system in a series of projects that will add another 4 billion cf/d of capacity.

Wednesday’s announcement marks the second time in a week that Calgary-based pipeliners announced demand for space on new lines had significantly outpaced what was being offered.

During an investor presentation last week, Enbridge Inc.’s president of gas transmission and midstream, William Yardley, said that natural gas producers had submitted bids totalling three times the capacity of a 190 million cf/d expansion of its T-South line in British Columbia.

“There’s a huge amount of capital that’s being spent,” AltaCorp Capital analyst Dirk Lever said of the natural gas pipeline expansion projects. In addition to TransCanada and Enbridge, Lever said that Veresen Inc. and Pembina Pipeline Corp. had announced projects to expand natural gas infrastructure in northwestern Alberta and northeastern B.C.

Some of those projects involve adding new compressor stations, rather than new pipes, to expand capacity.

“There’s so much drilling going on in new areas and those new areas need to be serviced,” Lever said, adding, “The infrastructure there has been insufficient.”

On Tuesday, Alliance Pipeline L.P. announced part of its gas pipeline to Chicago had shifted as a result of heavy rain near Grande Prairie, Alta., and the company declared a force majeur, leaving some producers scrambling to find space on near-full competing pipeline. Other producers were forced to shut-in some of their production.

The event reduced shipments on Alliance, which is jointly owned by Enbridge and Veresen, by 500 million cf/d, or 31 per cent of the line’s capacity. Like others, that line had been full and the owners have asked gas producers to commit more volumes to expanding it.

Johannson said he expects gas producers will demand even more pipeline space as production continues to grow,  so long as companies connect those producers with diverse markets in Canada and the U.S.

“I expect more production to come on the system and I know the producers are far more interested today in how they’re going to take it off the system,” he said, adding, “in order to expand your production, you need market.”

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