Analysis: Oil-by-train may not be substitute for Keystone pipeline

Thu Apr 18, 2013 2:24am EDT
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article | Single Page
[-] Text [+]

By Patrick Rucker

WASHINGTON (Reuters) - The prospects for bringing large amounts of Canadian heavy crude oil into the United States by train is a contentious issue as the U.S. government weighs whether to allow the controversial Keystone XL pipeline to go ahead.

An assumption that oil would move by rail without Keystone was a key part of a U.S. State Department report in March that found development of Canada's oil sands region will proceed at roughly the same rate, with or without the pipeline.

That finding undercut warnings from environmentalists that the pipeline would lead to a spike in greenhouse gas emissions.

Proponents for the roughly 1,200 mile pipeline, delivering the oil in Canada's Alberta province to refineries on the U.S. Gulf Coast, say moving huge volumes of crude by rail would be dirtier and more prone to mishap than a pipeline and the market would adopt rail if the project were halted. The State Department report endorses that view.

But some industry officials, energy analysts and recent data raise questions about whether the industry is really eager to adopt crude-by-rail should the U.S. government rule against the TransCanada Corp (TRP.TO: Quote) pipeline.

They say train transport is so expensive that Canadian heavy crude, produced by processing bituminous sand, isn't likely to reach Texas and Louisiana in Keystone-like quantities by rail.

These experts also point to plentiful supplies of lighter crude oil from the Bakken shale formation in North Dakota, which is roughly 900 miles closer to the Gulf than the hub of Canadian oil sands production, and plenty of heavy crude from traditional sources such as Saudi Arabia, Mexico and Venezuela, as signs that Gulf Coast refiners can get along without Keystone.

The U.S. government is expected to make a final decision before the end of the year on the Keystone XL pipeline, which is designed to carry as much as 830,000 barrels per day, most of it from Canada.   Continued...

Taz Bouchier, an elder with the Idle No More movement, speaks during a rally in solidarity with the Washington D.C. protest against the Keystone XL pipeline and for environmental action in Edmonton February 17, 2013. REUTERS/Dan Riedlhuber