Potash Corp said it was putting its new Picadilly mine near Sussex, about 75 km northeast of St. John, in “care and maintenance” mode, resulting in the loss of 420 to 430 jobs.

Potash prices have fallen sharply over the past year, under pressure from bloated capacity, soft grain prices and weak currencies in major consumers such as India and Brazil, one of PotashCorp’s largest customers.

“We don’t see in the short term how things will turn around quickly that would change the environment,” CEO Jochen Tilk said in an interview.

“We are repositioning the company in light of that but we are still optimistic on the long-term prospects for our business,” he said.

Saskatoon-based PotashCorp’s stock was 60 cents firmer at $23.63 on the TSX on Tuesday. The stock is down 45 per cent in the past 12 months.

As demand for potash has fallen worldwide, PotashCorp, the world’s biggest fertilizer company by capacity, has in recent months closed its nearby Penobsquis potash mine and suspended production at three mines in Saskatchewan. PotashCorp’s other New Brunswick mine, at nearby Cassidy Lake, was shut down in the late 1990s.

PotashCorp, which had more than 5,000 employees worldwide at the end of 2014, said it would retain 35 employees at Picadilly to keep the operation in “care-and-maintenance,” while another 100 are to stay on through a four-month “transitional period.”

The Picadilly mine, built between 2008 and 2014, would take about a year to restart if PotashCorp decides to resume its operations, the company said.

About 100 affected New Brunswick employees could be relocated to the company’s Saskatchewan sites, PotashCorp added.

PotashCorp said it expected to recognize severance and transition costs of about $35 million in the first quarter as a result of suspending operations at Picadilly.

PotashCorp said its customers “historically served” via New Brunswick will now be served from Saskatchewan through Canpotex, the joint potash export arm it operates with Agrium and Mosaic Co.

PotashCorp’s port terminal at St. John will also be made available to Canpotex, the company said.

The suspension would help PotashCorp to reduce its full-year cost of goods sold by $40 million to $50 million and would eliminate capital expenditures of about $50 million in 2016 and $135 million in 2017-18, the company said.

— Reporting for Reuters by Swetha Gopinath in Bangalore and Nicole Mordant in Vancouver. Includes files from AGCanada.com Network staff.

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Canada’s Conservative government plans to introduce legislation this fall giving all shippers more clout in ensuring consistent rail service, and improve ways to resolve disputes.

The rail companies are concerned that the legislation could end up dictating or imposing levels of service that don’t take into consideration existing commercial arrangements with customers.

Claude Mongeau, the CEO of Canadian National Railway Co., said the imposition of service obligations on rail companies might give relief to one unhappy shipper but that may come at the cost of upsetting service for others down the line as railroads are large, interconnected networks.

“It doesn’t take many to create a ripple effect… I say beware of what you ask for as you may just derail the efficiency that we have been able to gain,” Mongeau told Reuters in an interview after speaking to a business audience in Vancouver.

The planned legislation stems from a rail service review conducted for the government by an independent panel following years of complaints from shippers, such as farmers and forestry companies, about poor rail service, including damaged rail cars and unpredictable pickups.

Railroads have defended their service track record saying it is fairly good overall and that additional legislation is not the answer, especially in a free market economy.

Mutual trust

Mongeau said legislation could poison relationships built up between customers and railroads over many years, and stop them from sharing information and data for fear it could be used against them in a dispute. “It is difficult to have mutual trust with a gun to your head,” he said.

Representatives of shippers and railroads spent four months in a government-sponsored committee this year trying, but ultimately failing, to develop both a template for service agreements and a dispute resolution process that could be used commercially.

Mongeau said that if the government is bent on introducing legislation it should be “balanced” and “targeted.” That could be achieved by requiring mediation as a first step to resolve disputes, rather than imposed arbitration, he said.

If cases did end up in arbitration, it should take place under the aegis of the Canadian Transport Agency, a government regulator that has a duty to ensure transportation efficiency in Canada, instead of a roster of arbitrators who don’t have rail industry experience, Mongeau said. Arbitration should also only be available to rail customers whose access is limited to a single railroad, not to those who can switch service providers if they are unhappy with their service, he said.

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The company said Thursday the rapidly rising Souris River forced the shutdown on Monday night of a line running between southern Saskatchewan and the U.S. Midwest, one of three heavily used CP freight arteries into the United States.

The news comes a week after CP, Canada’s second biggest railway, said this year’s spate of service disruptions due to heavy snow and then flooding looked to be over, and that it was working to earn back customer confidence.

“Just when much of the investment community and CP thought we were seeing greener pastures ahead, we have more challenges,” said Raymond James analyst Steve Hansen.

“It’s not anything that CP’s doing wrong per se. It’s just really a matter of Mother Nature hitting hard where CP has its tracks located,” he said.

CP’s shares are down 10 per cent this year, in part because of a bigger-than-expected two-thirds slump in profit in the first quarter when avalanches and heavy snow in Western Canada forced it to close tracks.

As winter turned to spring, flooding along Manitoba’s Red River in April compelled the railroad to close tracks in that province and reroute trains.

In this week’s closure, caused by heavy rains in southern Saskatchewan, CP is re-routing traffic east through Winnipeg on its own tracks south to Glenwood, Minn., about 200 km northwest of Minneapolis, company spokesman Mike LoVecchio said.

Delays for shippers were less than 24 hours, he said.

“We were able to evacuate all rail traffic so there are no stranded shipments,” LoVecchio said of the track that handles all types of freight, including grain, coal, intermodal and merchandise shipments.

CP would normally use other companies’ tracks in the flood-hit area, but they are also being affected by high water levels, LoVecchio said.

Flooding at Minot, N.D. has disrupted U.S. carrier BNSF Railway Co., whose line linking Chicago and Seattle runs through the northern part of the state, carrying BNSF freight and Amtrak’s Empire Builder passenger train.

BNSF said in a note to freight customers earlier in the week that the line could be out of operation for two weeks or longer. The railway, owned by Warren Buffett’s Berkshire Hathaway, said it was attempting to reroute traffic, but customers could expect significant delays.

The rapidly rising Souris River poured over flood defenses in Minot, overwhelming efforts hold back the water and forcing the immediate evacuation of thousands of homes.

Small bits of track have been washed away in Saskatchewan but CP wouldn’t be able to tally or repair the damage until the water receded, LoVecchio said.

Canadian National Railway (CN), CP’s bigger rival, has been relatively unscathed by inclement weather this year as its tracks mostly skirt the regions hardest hit by snow or flooding. CN’s stock is up 13 per cent this year. 

— Additional reporting for Reuters by Allan Dowd.

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The Canadian Renewable Fuels Association wants Ottawa to raise the ethanol-in-gasoline mandate from five per cent to 10 per cent and the still-to-be-implemented biodiesel threshold from two per cent to five, president Gordon Quaiattini said.

Canada’s five per cent ethanol requirement takes effect across Canada on Dec. 15 after the government passed federal renewable fuel regulations into law in September. Several provinces already have ethanol mandates in place.

A start date for the two per cent renewable content in diesel has not yet been set but Ottawa has committed to implementing it in 2011, Quaiattini said.

“We are absolutely talking to government about wanting to expand those mandates,” Quaiattini told Reuters in an interview on the day the association released a report on the state of the fledgling industry.

The document came a day after the U.S. Environmental Protection Agency said ethanol and other renewable fuels must account for at least 8.01 per cent of the motor fuels sold in 2011 at U.S. service stations to comply with a federal mandate.

The Canadian government has set aside $1.5 billion over nine years to invest in the sector, which generates about two billion litres of biofuel a year. The sector has grown exponentially in Canada in the past five years but still only makes up two per cent of biofuels produced worldwide and four per cent of U.S. output.

Quaiattini declined to speculate on a timetable for the higher renewable fuel standards the industry is asking for but said they should be in place much more quickly than the first batch.

“We expect to do it at a pace much quicker than the first build-out. We now have the policy and regulatory framework in place. We don’t need to duplicate that going forward,” he said.

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