Rail option faces obstacle

Gary Park

For Petroleum News

Plans for experimental shipments of crude by rail to Canada’s Hudson Bay, then by tanker through Arctic waters to refineries in Atlantic Canada and Europe have encountered stiff resistance.

The Manitoba government, although it has no final jurisdiction over the rail line, is not prepared to shoulder the safety and environmental risks in the wake of the Quebec rail disaster.

Transportation Minister Steve Ashton said the Lac-Megantic tragedy has triggered a “tenfold increase” in public concerns and served as a “wake-up call” to authorities over the use of rail to carry hazardous materials.

He suggested Omnitrax Canada, the regional railway that is spearheading the new option for getting crude to market, should be ordered by the Canadian government to “return to the drawing boards.”

Omnitrax, working with the port authority at Churchill in Manitoba and oil producers, had planned an initial shipment in September that could grow to 2 million barrels a year of light sweet crude.

While agreeing to expand its public consultations, the railway gave no indication it is willing to drop the idea.

Ashton said that although his government supports diversifying shipments through Churchill it won’t endorse the movement of crude by rail without further improvements to the line.

He noted Transportation Safety Board of Canada statistics show there were 63 accidents, 10 of them derailments, on the Hudson Bay line in the 2003-12 period.

Transport Canada, Canada’s lead regulator, said only that Omnitrax would be required to comply with all federal regulations.

Omnitrax President Merv Tweed said his company has an obligation to answer any misunderstandings over what is being attempted and assure the public that it will comply with all safety and environmental regulations.

Grand Chief Irvin Sinclair of the Keewatin Tribal Council said one derailment could destroy the livelihood of First Nations people in northern Manitoba for generations.

Churchill Mayor Mike Spence said the town supports the Omnitrax plan provided it meets federal regulations governing the safe transportation of petroleum products.

But town residents have raised concerns about the risks to the town’s reliance on tourists for polar bear, beluga whale and bird watching.

The port, which is used during a brief open water season to export grain and lumber, offers a “competitive cost advantage to deliver oil to multiple destinations for a short period of time each year,” said Jeff MacEachern, executive director of the Churchill Gateway Development Corp.

He said earlier this year that Churchill is not a major solution to opening new markets for Canadian oil sands and Bakken crude, but the option is being “looked at seriously because producers want optimality in how they transport their product to refineries and overcome congestion in pipelines and rail services.”

The Churchill port authority said the facility is experiencing a longer ice-free season that can be extended with the use of icebreakers.