Harrison says Canadian Pacific proceeding cautiously with oil-by-rail business

TORONTO – The head of Canadian Pacific Railway (TSX:CP) says he believes there is enough room in the oil and gas industry for businesses to oil ship by rail and by pipeline.

However, Hunter Harrison told the company’s annual meeting that the railway is “proceeding cautiously” in the business and doesn’t plan to build long-term infrastructure for what could be a short-term boom.

“It’s an opportunity but it’s something we have to be pretty cautious about,” Harrison said from the meeting at a Toronto hotel.

“As things settle in, I think you’ll see some more growth than people have anticipated there,” he added.

CP Rail has been increasing crude shipments as Canadian oil producers look for ways to get their product to market as production ramps up from the oilsands and pipeline companies struggle to increase capacity quickly.

Enbridge has proposed expanding capacity on some pipes in the Great Lakes region and reverse the flow of another line between Montreal and southern Ontario, while TransCanada has looking to ship oil east with its Energy East Pipeline project and south to the U.S. with its Keystone XL pipeline project.

The U.S. project, which is awaiting government approval, has faced significant opposition from groups concerned about the damage a leak would do to the environment.

Harrison says the Keystone XL debate has drawn attention to railway service as an alternative which offers extra flexibility.

Shipping oil by rail was one of the key drivers behind the railway’s ability to deliver its best first-quarter results in its 132-year history.

The company expects to double its deliveries of crude oil 12 months earlier than previously forecast.

The former chief executive of Canadian National (TSX:CNR) met with shareholders for the first annual meeting since he was brought on board last summer after a protracted battle between the company’s former leadership and a major shareholder.

“What a difference a year makes,” Harrison said at the start of his speech.

The arrival of a new leader at CP Rail last year marked the end of a dramatic chapter in the company’s history. Then-CEO Fred Green stepped down just hours before the start of a shareholder meeting to appease the company’s largest shareholder, activist fund manager Bill Ackman and his investment company Pershing Square.

“This has been a bumpy road, but a successful road, and I want to personally thank all of you for the confidence that you’ve shown and the organization and this team,” Harrison said.

The changes have included bringing fellow CN executive Keith Creel over to Harrison’s new team at CP Rail where he serves as president and chief operating officer and is a likely successor to the CEO when he is expected to retire again in about three years.

“We’ve got a very competent, outstanding individual in place, and everybody feels better as a result,” Harrison said.

In December, the company disclosed a capital spending in the range of $1.0 billion to $1.1 billion over 2013, but Harrison said executives have since added to that with another $50 million to $70 million of financing for its line which runs for Moose Jaw to Chicago.

Shares of CP Rail closed down $2.40 to $123.16 Wednesday on the Toronto Stock Exchange.