Florida USA - After a plunge in prices for crude oil, Canadian Pacific Railway is scaling back spending on its rail network.
 
Keith Creel, chief operating officer for CP, said the Calgary-based railway had planned to spend about $210-million this year on 31 new sidings and rail yards in a bid to run longer trains at faster speeds.
 
But with crude trading near $50 a barrel and oil companies slashing production, Mr. Creel said six of these sidings will not be needed.
 
"Crude is not where we thought crude would be," Mr. Creel told an investors' conference in Florida on Tuesday.
 
CP has cut the number of oil tank cars it expects to haul in North America this year to 140,000 from 200,000, blaming the steep plunge in crude prices.
 
"If we're at 140,000 crude cars, there's six sidings that I likely won't need. That represents about $42 million, $43-million of expense," said Mr. Creel, adding CP was postponing, not abandoning, plans for the sidings.
 
"Probably what we'll do is the grading and other groundwork, get them rail-ready so that when the growth does come, and we think it will, in the back half of this year and into 2016, it will not take us eight or nine months to put those sidings in."
 
The shelved siding projects are located between Edmonton and Winnipeg and south into Minnesota, lines that see heavy traffic in several commodities, including potash and grain.
 
(A rail siding is a short railway alongside a mainline that allows trains to pass one another, improving the speed and efficiency of the line.)
 
The business of moving crude by rail accounts for about 7 percent of CP's total revenues.
 
It's a business that has taken off in just a couple of years as oil producers facing a shortage of pipelines look for ways to move product to refineries.
 
Railways have gained a reputation as a flexible mode of transport for the energy business, but this comes with a price.
 
It can cost as much as $22 to move one barrel of oil from Alberta to parts of the United States, more than double the price of shipping by pipeline.
 
The plunge in crude prices has, for some oil drillers, made shipping by rail a money-losing transaction.
 
Suncor Energy Inc. blamed high rail costs last week when it said it was no longer using trains to move its oil to the U.S. Gulf Coast.
 
In light of the lower crude volumes, CP has forecast overall revenue growth 7 percent or 8 percent this year, which is lower than the "double-digit" unofficial estimates the company has offered.
 
Executives at the railway, which recently posted record annual revenue, has said a lower Canadian dollar and cheaper energy costs will spur consumer spending and demand for much of the merchandise that moves by rail.
 
Despite their reduced forecasts, CP and Montreal-based counterpart Canadian National Railway have said they still expect to haul more crude this year than last as new terminals are built and as the approval processes drag on for major pipeline projects.
 
CP Chief Says Grain-Movement Rules Will End
 
The law that forces Canada's two major railways to move a set amount of grain every week will go away after the October election, predicts Mr. Creel.
 
The government enacted the rules last year after months of complaints from western farmers and grain companies about poor service from CP and Canadian National Railway, which were were told to move a minimum amount of grain or face a fine of $100,000 a week.
 
The railways said the slow grain movements were to due to a harsh winter, a record-sized 2013-14 crop, and poor co-ordination among the ports, elevators, and others along the supply chain.
 
Farmers said the crop backlog was due to budget-slashing railways focusing on other commodities.
 
The law is not set to expire until August, 2016.
 
A spokeswoman for Transport Minister Lisa Raitt did not respond to a request for comment.
 
Mr. Creel said at an investors' conference in Florida on Tuesday the law was aimed at winning votes for the ruling Conservative party in the coming federal election and had no effect on the amount of grain hauled by railways.
 
"It didn't make us move more grain. We still moved record amounts of grain. We were moving record amounts of grain when the legislation came out," he said.
 
"It was a political position. There is a mandatory election in Canada. The constituents that that impacted were voters, a lot of voters. I don't think the mandate's going to be renewed as of this crop year."
 
Another regulation that irks the railway is the limit on revenue it can make hauling canola, wheat, and other grain for export from Western Canada.
 
CP has urged a panel reviewing the country's transport laws to revoke the cap, but Mr. Creel said he believed the rule is here to stay.

Eric Atkins.