Unwilling to put up with more indecision by the Obama administration on Keystone XL, TransCanada Chief Executive Officer Russ Girling is putting an end to talk that he is bluffing by laying out his strategy to move oil sands crude by rail from Alberta to the Texas Gulf Coast.
“Our customers asked whether we would explore with them potentially building railcar loading facilities (at the Hardisty, Alberta, pipeline hub), which is the initiation point of the current Keystone pipeline and we’ve said we will do that and we’ll do it expeditiously,” Girling told reporters in Washington, D.C., where he met with U.S. lawmakers, business leaders and media outlets.
He said TransCanada’s storage facilities in Hardisty and Cushing, Oklahoma, could be increased with new storage space in Steele City, Nebraska, plus loading and unloading rail terminals, opening the way for crude to be pumped into XL’s already-operating southern leg from Cushing to Gulf Coast refineries.
A spokesman for TransCanada confirmed the company is examining modifications to its current shipping contracts to allow for rail shipments that do not require a Presidential Permit to cross the Canada-U.S. border.
The technical and financial details of increased rail use are expected to be worked out within the next few weeks.
Girling said TransCanada has been pondering a rail option for some time, but was forced to act when the Obama administration indicated a final decision on XL could be pushed into 2015 after the mid-term congressional elections and a court ruling on whether TransCanada has a legal right of way through Nebraska.
But it’s still plan B
The shift to rail is rapidly taking place, with major oil sands producers such as Suncor Energy and Cenovus Energy using that option to access U.S. markets and scoffing at environmentalists who argue rail is too costly to displace pipelines.
Girling agreed that TransCanada will not make the same profits from rail as a pipeline, with most of the revenue going to shippers, but rail would help pick up the slack and retain faith with the company’s clients.
Some of TransCanada’s customers have shipping arrangements in place with railroads, but others don’t.
He told the Globe and Mail in May that the industry’s choices “aren’t ‘leave the oil in the ground and move to alternative energy,’ the choices really are ‘rail or pipeline.’ Pipeline, by far, is the best alternative.”
But TransCanada has repeatedly aired its frustration with a five-year wait for Obama to make his final decision on XL, which would carry up to 830,000 barrels per day of crude bitumen from Alberta and light crude from the Bakken in North Dakota, to Cushing.
The GHG factor
Gary Doer, Canada’s ambassador to the United States, told a petroleum industry dinner in Calgary May 21 that Canadian oil accounts for 33 percent of U.S. imports compared with 19 percent in 2009, with most of the increase being moved by rail or truck.
He said those two options increase greenhouse gas emissions by 28 to 42 percent and add about US$10 per barrel to transportation costs.
“If you say ‘no’ to the pipeline you are saying ‘yes’ to higher GHGs,” Doer said. “What we are dealing with is an exercise in hyperbole, not an exercise in facts. That position has fallen like a house of cards and someone has to have the backbone to say that.”
He said the Canadian government has signaled to Washington that it is prepared to negotiate common regulations and standards on GHG emissions on both sides of the border, but that offer has met with silence.
Doer said he has grown tired of the failure in the U.S. to accept that approval of Keystone XL is the best way to displace crude imported from Venezuela, whose own environmental record he argued should be examined by the environmental nongovernment organizations.
He also noted that 63 percent of Canada’s electricity originates from renewable sources compared with 13 percent in the United States, while emissions from three U.S. power plants can exceed those from the oil sands.
CN’s take on safety
On the rail front, Claude Mongeau, chief executive officer of Canadian National Railway, told an audience in Edmonton May 22 that his company has made “remarkable” progress in its safety record over the past 10 years.
He said main track accidents are down 50 percent, “despite a significant growth in volume,” while 99.999 percent of dangerous goods reach their destination intact.
Mongeau said CN Rail spends C$1 billion a year to maintain network safety and integrity and is working on a strategy to further improve that record, including the phasing out of 140 old-style DOT-111 tank cars within three years, while cars will be strengthened to reduce the risk of ruptures.
