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Canadian Pacific sees crude shipment gains regardless of Keystone’s fate

Hunter Harrison, Canadian Pacific chief executive officer.

Tim Fraser/The Globe and Mail

Canadian Pacific Railway Ltd. anticipates that its business in shipping crude oil by rail could grow two to three times by 2016, regardless of whether the Keystone XL pipeline is approved.

"I think our assumptions basically are that it is going to be approved," said Hunter Harrison, the railway's chief executive officer, speaking Wednesday to the investment community in New York. But he added: "I don't think whether Keystone comes or doesn't happen, it's going to effect those numbers."

Logically, it would seem that if the pipeline isn't approved, it would benefit CP and other railways that can provide an alternative means of transporting crude.

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But "I happen to think that maybe there's a need for both," rail and pipeline, Mr. Harrison said, noting that crude by rail serves its own niche, particularly with its flexibility. "As the markets move and you take off with a crude train, and all of a sudden the market in the East is better than in the Gulf [of Mexico], you can turn the corner with that rail train and say, Go to the East instead of the South. Hard to do with a pipeline."

He noted the competitor Canadian National Railway Co.'s advantage in crude-oil territory is in Northern Alberta, whereas CP's advantage is in the Midwest Bakken region. "Our growth is going to be slower in the West. My thoughts and predictions are probably going to be more dramatic to the Northeast. The Northeast has become a bigger player quickly," Mr. Harrison said. "There is plenty of revenue for us, and there is plenty of revenue for our competition."

Meanwhile, as CP continues to restructure its operations and turnaround its previous inefficiencies, Mr. Harrison said that the company's goal of reducing head count by 4,500 over four years through attrition, reducing managerial staff and cutting the number of consultants and contractors is "ahead of schedule." Currently, around 3,000 positions have already been eliminated, and the job reductions could rise to 6,000.

"It certainly could be six [thousand]," Mr. Harrison said. "The question becomes right now how effectively and how fast can we change out contractors. So to some degree, we're going to be taking contractors out and substituting with employees."

"We have recognized some of our weaknesses, we've recognized where we had too much infrastructure and too many people. And we're trying to solve that in a very sensitive, humane type of way with attrition and so forth," he added.

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Guy Dixon is a feature writer for The Globe and Mail. More

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