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CORRESPONDENCE TO THE SEC

July 29, 2005

United States Securities and Exchange Commission

100 F Street, N.E.

Washington, D.C. 20549

    Attention:

    David R. Humphrey

    Accounting Branch Chief

    Re:

    SEC Comment Letter dated July 14, 2005

    Form 40-F — fiscal year ended December 31, 2004

    Canadian Pacific Railway Limited, Canadian Pacific Railway Company

    (collectively, “CPR”)

    File Nos. 1-01342 and 1-15272

Dear Sirs,

This letter is in response to the comment set forth in your letter of July 14, 2005, regarding
CPR’s reportable business segment disclosure in the notes to our audited financial statements for
the fiscal year ended December 31, 2004, as included in our Report on Form 40-F for the fiscal year
ended December 31, 2004.

SEC Comment

Specifically, your letter states:

    “Network and Right of Way, page 14

    1.

    We note from disclosure in Note 23 to the Canadian GAAP audited financial
statements that you operated in only one business segment, rail transportation, and
that the financial information presented at this level is used by management for
decision making. However, given that your network is composed of four primary
corridors, the Western, the Southern, the Central, and the Eastern corridors, tell us
how you have determined that operations generated in these corridors do not result in
separate and distinct reportable business segments. Your response should address
paragraphs 10-15 of SFAS No. 131. If you have aggregated the corridors, tell us how
the aggregation criteria under paragraph 17 of the SFAS No. 131 had been met.
Further, clarify for us if the information used by the chief operating decision maker
to assess the company performance and allocate resources is based on financial
information at the consolidated financial level, with no analysis given to lower
levels or units of operations, as implied in Note 23 to the audited financial
statements. We may have additional comments after review of your response.”

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CPR Background Information

Similar to other North American Class 1 railways, CPR transports over a franchise-wide network a
mixture of traffic with multiple origins and destinations, often on trains with widely diversified
loads. This traffic frequently utilizes pooled locomotive and car fleets. The primary traffic
corridors represent groupings of major traffic flows but are not viewed by CPR as discrete profit
centers, and the integrated rail network must be managed end-to-end to improve efficiency. It is
often the case that contracts with customers will extend into more than one corridor, and traffic
routinely moves not only from branchline to mainline within a corridor but also from corridor to
corridor before reaching its final destination.

Further, a large proportion of the costs required to operate CPR’s highly integrated network are
fixed in any one fiscal period. Revenues are earned by individual carloads that move across the
network and between corridors. These characteristics require subjective allocations of most of the
costs whenever CPR attempts to analyze costs and determine profitability of individual transports
or services. No regular management reports are produced by CPR that provide breakdowns of
profitability by corridor.

CPR Response

In this operating environment, CPR’s four primary geographical corridors are not reportable
business segments within the criteria set forth in SFAS No. 131, paragraphs 10-15.

Paragraph 10 of SFAS No. 131 defines an “operating segment” as a component of an enterprise:

    “1. That engages in business activities from which it may earn revenues and incur expenses
(including revenues and expenses relating to transactions with other components of the same
enterprise),

    2. Whose operating results are regularly reviewed by the enterprise’s chief operating
decision maker to make decisions about resources to be allocated to the segment and assess
its performance, and

    3. For which discrete financial information is available.”

CPR’s chief operating decision maker does not review segmented operating results corridor by
corridor. Moreover, assets, revenues and operating expenses are not reported to senior management
on a corridor-by-corridor basis as CPR does not produce discrete financial information on that
basis. As a result, primary corridors do not qualify under the second or third of the
aforementioned criteria as reportable operating segments.

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In addition, Paragraph 14 of SFAS No. 131 states that “[g]enerally, an operating segment has a
segment manager who is directly accountable to and maintains regular contact with the chief
operating decision maker to discuss operating activities, financial results, forecasts, or plans
for the segment” and clarifies that “segment manager” refers to a function rather than a specific
title. No CPR personnel, by title or otherwise, perform the function of segment manager, as
defined above, with respect to any of the four primary corridors.

Moreover, Paragraph 17 of SFAS No. 131 regarding aggregation of operating segments is not
applicable to CPR’s financial reporting because, as discussed above, the four primary corridors do
not constitute separate and distinct business segments. However, even if the primary corridors
were deemed to be separate and distinct business segments, CPR likely would be entitled to
aggregate the corridors into a single operating segment because the corridors, as geographic
territories comprising a single integrated rail system, are similar in each of the following
respects:

    •

    the nature of the services;

    •

    the nature of the production process;

    •

    the type or class of customer for services;

    •

    the methods used to distribute the products or provide the services; and

    •

    the nature of the regulatory environment;

and, based on the foregoing similarities, it is likely that the corridors would exhibit similar
economic characteristics, although CPR cannot confirm this as it does not produce financial reports
by corridor. Moreover, CPR does not believe that financial reporting by corridor would further the
objectives of SFAS No. 131, as stated in Paragraph 3 thereof, of helping financial statement users
better understand CPR’s performance, better understand its prospects for future net cash flows or
make more informed judgments about CPR’s enterprise as a whole.

Although the chief operating decision maker at CPR principally uses consolidated financial
information to assess performance and allocate resources, CPR management does review revenue by
commodity groups shipped and revenues by commodity groupings are reported quarterly in CPR’s
filings. In addition, CPR management occasionally reviews commodity group financial analyses that
identify relative contribution by various commodity groups. However, such financial analyses by
commodity groupings are not a regular source of management information for CPR’s chief operating
decision maker in assessing performance or allocating resources because the allocation of costs
among commodity groups is highly subjective given that CPR transports a mixture of traffic with
multiple origins and destinations, often on trains with widely diversified loads, over a
franchise-wide network. Resource allocation decisions are therefore driven by the cumulative
effects of system-wide traffic patterns.

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CPR Confirmations

As requested, we acknowledge that:

    •

    CPR is responsible for the adequacy and accuracy of the disclosure in the subject
filing;

    •

    staff comments or changes to disclosure in response to staff comments do not foreclose
the Commission from taking any action with respect to the filing; and

    •

    CPR may not assert staff comments as a defence in any proceeding initiated by the
Commission or any person under the federal securities laws of the United States.

We hope that the foregoing response addresses the concerns raised in your July 14 letter and, if
you have further questions, would be pleased to discuss this matter with you at your convenience.

Yours truly,

(signed)
“M.T. Waites”

M.T. Waites

Executive Vice-President and Chief Financial Officer

Canadian Pacific Railway Limited

Canadian Pacific Railway Company