UPDATE 1-Crude-by-rail no substitute for Keystone XL -energy minister

Wed Apr 24, 2013 5:35pm EDT
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* Trains poor alternative to pipeline for oil -minister

* Output would be dented if rail only option-minister

* Upbeat view of crude-by-rail of State Dept. questioned

By Patrick Rucker

WASHINGTON, April 24 (Reuters) - Using trains to move heavy crude oil out of Western Canada would be a poor alternative to the controversial Keystone XL pipeline, Canada's top energy official said on Wednesday, and a rail-only plan would likely dent future oil sands development.

U.S. officials are weighing whether to approve construction of the proposed Keystone pipeline that could deliver as much as 830,000 barrels a day of mostly Canadian and some U.S. crude oil to refiners in Texas and Louisiana.

Joe Oliver, Canada's natural resources minister, said costs and logistical challenges make crude-by-rail a poor second choice for oil sands producers trying to reach the U.S. Gulf Coast.

"I don't think anybody feels that it could be a substitute for pipelines," Oliver told Reuters.

In a report that weighed the environmental impacts of the Keystone pipeline, the U.S. State Department concluded that blocking the 1,200 mile project would do little to slow the oil sands sector since crude-by-rail was such a close second choice.   Continued...