Crude-By-Rail Expected to Triple as New Oil Pipelines are Beset with Protests and Regulatory Hurdles: Why Pipeline Transport of Oil is Safer, Cleaner, Cheaper, and More Sensible

Crude-By-Rail Expected to Triple as New Oil Pipelines are Beset with Protests and Regulatory Hurdles: Why Pipeline Transport of Oil is Safer, Cleaner, Cheaper, and More Sensible

It is considerably more expensive to ship crude oil by rail compared to pipelines. Pipelines are also a much safer way to transport crude than by rail. However, due to the time constraints in building oil pipelines due to regulatory hurdles and considerable public opposition to them, both in the U.S. and in Canada, it is inevitable that more and more North American crude will by shipped by rail. Shipping by rail also requires the burning of massive quantities of diesel fuel compared to pipelines which only utilize pumping every few hundred miles. This makes the carbon footprint much higher for crude-by-rail vs. pipelines. The possibility for spills and accidents is higher for the trains, and although the spills are smaller than for pipelines, the accidents can be devastating.

It has recently been reported that shipping crude by rail is expected to double in 2018 compared to 2017 and triple in the coming years and much of that crude will be heavy oil from Canada’s Alberta tar sands fields and Western basins and be shipped to the U.S. Gulf Coast. One analyst predicts that Canadian crude exports via rail will increase from 200,000 barrels per day to 600,000 barrels per day by 2021. Crude is still in high demand in North America and is expected to remain that way for a while so the assertions by some economists that Canadian heavy crude, especially tar sands crude, is not in demand due to its quality, are simply incorrect. However, I do know that transporting heavy tar sands oil via pipeline requires the addition of diluting agents, basically lighter hydrocarbons such as natural gasoline and condensates. This helps to decrease the viscosity of the heavy crude so that it can flow more readily in pipelines. Some have argued that the heavy crude is more likely to spill from pipelines but this is not born out by statistics. It may be harder to clean up after a spill though, but I am not sure of that either. Despite the higher cost to ship via rail the heavy Canadian crude can more than make up that cost by shipping to the U.S. Gulf Coast where it is in high demand. The Canadian issue is the need to get crude to the higher price markets in the U.S. even if the cost to ship by rail is $15-19 per barrel compared to $7 per barrel if transported by pipeline. The gridlock in the construction of the Keystone XL pipeline has been lifted somewhat by Trump’s approval of the project but for now the only solution is to ship by train.

While pipeline spills are often much higher volume spills than those by train or truck, there are far more spills via train and truck. There is also the concerning issue of the flammable nature of the crude. Bakken crude from North Dakota in particular has been quite explosive in accidents. Requirements for better built tanker cars and vapor pressure limits to decrease volatility before shipping may help to prevent future explosions. Train speed limits may also help.

This is another situation where anti-pipeline activist environmentalists are actually causing more potential environmental damage, more pollution, more carbon emissions, as well as hindering profits by blocking and delaying the safest way to transport a product in high demand. While they also seek to limit crude-by-rail, referring to them as “bomb trains,” at the same time they are enabling more trains by opposing pipelines.

References:

Cenovus to move 100,000 bpd of oil by rail to Gulf Coast – by Nelson Bennett, in BIV.com, Sept. 27, 2018