As president and CEO of the Chemical Industry Association of Canada (CIAC)—a group that represents the majority of companies that transform raw materials like oil, natural gas, minerals and biomass into substances and materials used to make more than 70,000 everyday products—Bob Masterson knows how crucial the safe and timely delivery of those goods is to the health and well being of the $60-billion industry.
But he also knows how demanding the handling, storage and movement of hazardous and non-hazardous products and substances requiring special care can be in a country as big and diverse as Canada.
“Getting our goods to market is challenging,” Masterson told Canadian Shipper in a recent phone interview from the CIAC’s offices in Ottawa. “Shipping is a major cost and concern for our members.”
In addition to transportation bottlenecks that arise from a myriad of economic, infrastructure and regulatory issues and problems, Masterson says the service environment in Canada is also vulnerable to disruptions from extreme weather events or labour strife like the recent CN workers’ strike.
Then there are unexpected interruptions like the blockade in February of much of the 30,000-km-long CN Rail network by protesters in support of the Wet’suwet’en hereditary chiefs, who oppose the $6.6-billion Coastal Gaslink route that would move natural gas from northeastern British Columbia to the Pacific Ocean.
The Canadian Chamber of Commerce called for an “immediate end” to the blockades, saying the country’s supply chains “are being severely damaged by the continuing interruptions.”
In addition to its own rail network, CN warned the blockades would also soon affect business at the ports of Halifax, Montreal and Prince Rupert.
“The impact is also being felt beyond Canada’s borders and is harming the country’s reputation as a stable and viable supply chain partner,” CN said in a recent statement.
Masterson echoed that concern. “Investors do pay attention to these issues when making decisions on whether or not to invest here,” he said.
Rail isn’t the only delivery method for Canada’s chemical industry. But it is by far the most important.
According to Masterson, 80 per cent of the corrosives, acids, plastic pellets and other products made by chemical companies in Canada—making it the country’s third-largest manufacturing sector—are shipped by rail.
Based mainly in Alberta, Ontario and Quebec, the chemical industry is also the second or third largest volume supplier by rail in Canada with more than $60 million of product moving daily and $23 billion annually.
Chemicals also account for roughly 13 per cent of all Canadian rail network traffic and an equally large percentage of the revenues of both CN and CP.
Seventy per cent of that freight rail volume—notably plastic resins, which are used to make everything from food and drug packaging to carpets, wallpaper and car parts, and sodium chlorate, which is used to bleach wood pulp in the pulp and paper industry—is exported to the United States.
In return, Canada imports smaller, higher-priced volumes of sulphuric acids and powerful chemicals for the mining, electronics and refrigerant industries.
A CN train makes the first delivery of propane feedstock—from Alberta—to BC’s Ridley Island Propane Export Terminal (RIPET) for export to Asia. (AltaGas)
Not surprisingly, the cross-border movement of these products require manufacturers, carriers, and third-party logistics (3PL) providers to be aware of and adhere to a complex web of ever-changing federal and state regulations aimed at preventing safety hazards such as combustion, contamination, and spoilage.
“A very complete alignment between Canadian and American regulations is critical,” said Masterson.
In addition to maintaining regulatory harmonization, Masterson said there is an urgent need for public policies and investments that will improve Canada’s supply chain networks—by rail, road and ship—and support growing demand and capacity for chemical production.
Masterson pointed to three new private projects worth a total of $13 billion—including a plastic resin plant in Sarnia and two facilities in Alberta, which has massive reserves of lighter chemical-making feed stock like natural gas and ethane—that he says will help put Canada on the Top 10 list of world chemical producers.
He said more projects that will double those investments are in the works. “Plastics industries have grown 8.5 per cent annually over the past 50 years,” said Masterson. “That’s twice the rate of international GDP and continues to grow.”
Rail service, he added, is a key factor in decisions by CIAC members on whether to locate a new facility or expand existing operations in Canada.
Most, however, are captive rail shippers with no viable shipping alternatives due to factors ranging from access to a single rail carrier to the distance, volume and type of product being shipped.
“Access to a safe, reliable and competitively priced rail service is critical to the success of the Canadian chemistry industry,” said Masterson.
He applauded recent initiatives like the 2018 Transportation Modernization Act, which brought in new data requirements to improve transparency and help shippers better monitor Canada’s freight rail network.
The new legislation also introduced measures like long haul inter-switching (from a 30-km to a 100-km radius) to help captive rail shippers and granted Transport Canada the power and ability to launch investigations into issues related to rail service.
According to Masterson, the changes have helped to improve the industry’s mostly positive albeit sometimes contentious relations with CN and CP.
“We all share concern for public safety and work closely together in our commitment to it,” he said.
One example of this was the recent decision by the CIAC-backed Transportation Community Awareness and Emergency Response initiative to revive the Safety Train with $220,000 in funding from TC.
Starting this summer, the converted tank car will travel to communities across Canada that have chemicals moving though them and serve as a mobile classroom to help train emergency responders.
For health and safety expert Jim Bird, chemical manufacturers and distributors are like two peas in a pod when it comes to the chemical supply chain in Canada.
“Distributors play a key role in the chemical industry because manufacturers, due to their size and policies, can’t react as fast as to the needs of end users,” said Bird, a regional director with Responsible Distribution Canada (RDC), a non-profit trade association for the distribution sector of the Canadian chemical industry.
Before joining RDC five years ago, he spent 37 years with Univar Solutions, a global chemical and fine ingredients distributor, and the leading distributor in Canada. He notably created the transportation safety program for the company, which had a fleet of over 300 rail cars when he retired.
“Whether it’s rolling stock or road transportation, distributors carry a big share of the load in chemical transportation in Canada and account for a majority of shipments,” said Bird.
Due to the special care needed to make, handle, store and deliver the products and substances that account for the biggest volume of chemicals produced and transported by distributors in Canada—including caustic soda (a corrosive commodity substance used in the pulp and paper industry and in the oil sands), methanol (various uses), xlyene (a common hydrocarbon solvent) and chlorine gas (a deadly disinfectant used to treat drinking and swimming pool water and to make hundreds of consumer products, including paints, textiles and insecticides)—Bird said the relationship between distributors and transporters is extremely close. “They both work with low profit margins and face the same issues,” he said.
According to Bird, one of the biggest issues facing both the chemical and transportation industries is the lack of truck drivers. “The shortage is even worse for the transport of dangerous goods because you need trained drivers willing to expect added risk with no extra premium,” he said.
In addition to knowing their company’s protocol in the event of an incident and what to do on scene, Bird said drivers need to learn through certified training courses everything from the hazardous nature of the substances in the tankers they haul and the pumping rates for those products to the compatibility of transfer hoses and how to protect themselves and others in the event of an accident or incident.
“Some of these flammable liquids in bulk tanker loads and trucks on the road represent explosion and fire hazards,” said Bird. “Some of them also have exposure health issues like cancer, burns and poisoning. Methanol, for example, is highly toxic.”
Though oil and gas are outside the scope of chemical distribution—even though oil and gas companies are the principal end users of substances like methanol, glycol and corrosion inhibitors—Bird said the chemical distribution network is both targeted by and involved in the flammable liquid training programs for fire departments that have sprung up across Canada since the 2013 rail disaster in Lac-Mégantic that killed 47 people and destroyed much of the Quebec town’s downtown core from the fires and explosion of multiple derailed tanker cars.
“The worst incidents usually involve oil and gas, and usually rail and pipelines,” he said. “There are many more incidents on the road, but they tend to be more contained because of the smaller amount of product involved and minor in nature, like a truck skidding off the road.”
He added that other major road-related incidents usually occur as a result of operator error at distributors’ sites, such as massive over spills of rail tankers involving groundwater pollutants like xylene, which can require costly, long-term cleanup work.
“Fortunately, there are lots of protocols in place and contained material volumes,” said Bird.
Improved digital technology—both on board vehicles and through service providers—is also helping to improve the safety and efficiency of the chemical supply chain in Canada and the U.S.
“There is a technical renaissance going on in our industry,” said Frank McGuigan, CEO of Dallas-based Transplace, a North American leader in transportation management services and logistics technology.
According to McGuigan, artificial intelligence is helping to enhance the digital tools and platforms his company has on the marketplace by providing the ability to not only predict and better understand shippers’ needs but to provide real-time information and assistance to help manage spills and other safety issues that arise.
“Trucks have had satellite tracking for 30 years,” said McGuigan. “The big difference now is that our optimized systems can proactively capture, harness, update and transmit information automatically to provide customers with real-time visibility and information on their assets.”
For his part, Doug Kimmerly, who owns a small brokerage company in Toronto called DSN that focuses exclusively on hiring trucks to transport chemicals and hazardous materials—everything from acids to lubricants—between the U.S. and Canada for chemical distributors and manufacturers, sees the rise of the controversial employment model known as ‘Driver Inc.’ as a growing safety issue in the trucking industry as a whole and the chemical transportation industry in particular.
“The vast majority of industry operators are highly trained professionals,” said Kimmerly. But he said the drivers’ shortage, together with a pay-per-mile industry approach that is being torpedoed by long border delays and more lengthy inspection requirements, is leading many fleets to cut costs and manage risks by setting up drivers as independent contractors who are supposedly eligible for deductions enjoyed by corporations—a tax-saving scheme that may soon be challenged by the Canada Revenue Agency.