|
US firm abandons Alberta rail plans Withdraws application to expand crude-by-rail facility after possible environmental review; Canadian rail posts declines in CBR GARY PARK For Petroleum News
A United States-based company has scrapped plans to double capacity at its crude-by-rail facility in Alberta, adding another element to the debate over the outlook for the use of rail.
USD Terminals said it has withdrawn an application to the Canadian Environmental Assessment Agency to build new tracks and loading buildings at its terminal in Hardisty southeast of Edmonton.
Beyond that the company declined to offer any further explanations. The agency has listed the USD proposal on its website as “cancelled.”
Under the plan, which had set a completion date of December, the expanded terminal would have loaded four trains a day, each hauling 120 tanker cars.
The CEAA told the company in December that it was seeking public input on whether to review the application, which it said had the potential for causing adverse environmental impacts.
An agency spokesman said there is no longer any need to conduct the assessment.
Allan Murray, reeve of the Municipal District of Provost, expressed disappointment at the loss of an increased tax base in a sparsely populated community.
He wondered if the outlook for crude prices and the CEAA decision to order an environmental review made the project uneconomic.
“It is hard to justify when another thing is thrown at you (in the midst of a challenging time),”Murray said.
USD had said last fall that the expansion was needed to provide an alternative to pipelines for carrying crude to market.
The company’s decision to withdraw the proposal coincides with a rapid decline in forecasts by railroads for a continued rise in CBR plans.
But that one development and the declining use of Alberta’s rail loading facilities does not spell the end of the tracks for CBR.
Rail need still seen Torq Energy Logistics Vice President James Graham estimated the failure to move ahead with any major pipelines will create a need in the near-term for means to transport 200,000-250,000 barrels per day, compared with the average CBR volumes of 100,000-150,000 bpd over the past two years.
He said that if none of those pipelines proceed, the transportation shortfall could soar to 650,000 bpd by 2020.
In the latest quarterly reports, Canadian National Railway’s total tanker loads of petroleum and chemicals declined 4 percent in the third quarter of 2015 over a year earlier, while Canadian Pacific Railway had a 31 percent drop, FirstEnergy Capital reported.
The Edmonton Rail Terminal, a joint venture by Imperial Oil and Kinder Morgan, is currently operating at only 20-40 percent of its 210,000 bpd capacity, although Imperial Chief Executive Officer Rich Kruger said that utilization rate is positive because it means the company is using the more attractive pipeline alternative.
He said Imperial pays C$7-C$10 per barrel for contracted pipeline space, C$9-C$11 for “walk-up” pipeline access, while unit trains cost C$15-C$17 and manifest trains are about C$20.
The terminal was developed as an “insurance policy,” but Kruger said he views pipelines as the most efficient, lowest cost and safest manner to carry hydrocarbons.
Cenovus Energy expects interest in CBR will continue improving, which prompted the company to buy a rail loading facility in central Alberta for C$75 million in mid-2015.
MEG Energy, another key oil sands producer, views CBR as an option for times when pipelines are over-subscribed.
A company spokesman said MEG is currently using Enbridge’s Flanagan-Seaway pipeline to deliver 25,000 bpd to the Gulf Coast and expects that volume to double early this year.
But rail offers an escape route whenever planned or unplanned pipeline maintenance is required, or as a way to reach markets that have little or no pipeline connections.
| 