Canada to build rail network for increased U.S. oil sales

Aug. 16, 2013 at 2:12 PM
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CALGARY, Alberta, Aug. 16 (UPI) -- Canada, currently the biggest source of U.S. energy imports, is seeking to expand that role,

Calgary-based TORQ Transloading has proposed building a $100-million rail hub able to ship 168,000 barrels of oil per day to U.S. markets in Kerrobert, Saskatchewan.

TORQ Transloading CEO Jarrett Zielinski said, "We think that Saskatchewan is strategically located. It has access to all the products our customers are seeking. We feel that Kerrobert is strategic in that it allows maximum diversity and flexibility for crude-by-rail out of Western Canada," The Calgary Herald reported on Thursday.

According to the U.S. government's Energy Information Agency, "Canada is one of the world's five largest energy producers and is the principal source of U.S. energy imports." As for the future the EIA adds, "Canada is the world's sixth-largest oil producer, and virtually all of its crude oil exports are directed to U.S. refineries. Long a major onshore and offshore producer of conventional crude, the recent growth in its liquids production has been driven by bitumen and upgraded synthetic crude oil produced from the oil sands of Alberta."

Canadian oil exports to the U.S. market however have become increasingly controversial due to the development of Alberta's vast oil sands resources, where more than $100 billion has been invested over the past decade. Environmentalists decry the development not only for decimating the landscape, but the fact that oil sands fuel emits a higher carbon content than traditional fuel, an issue that has stymied the development of the Keystone XL pipeline up to now.

The Keystone XL pipeline was designed to transport Alberta output to U.S. refineries on the Gulf of Mexico, but has run into both political and environmental opposition. In the wake of the rebuff, Canadian energy exporters have increasingly turned to existing hydrocarbon export facilities, including the conveyance of oil by rail, including the proposed Transloading $100-million rail hub.

But the Transloading proposal may face stiff opposition in the U.S. due to a recent railway catastrophe involving oil transport. On July 6 a Montreal, Maine & Atlantic train carrying 72 oil tankers rolled into the small Quebec town of Lac-Megantic, where it derailed and then exploded after its brakes apparently failed. In the resultant conflagration, an estimated 47 people were killed.

Such difficulties may increase, as Canada's Railway Association noted that as recently as four years ago Canadian railways moved just 500 carloads of crude oil, but that number has since then increased to about 140,000 carloads annually.

In the wake of the Lac-Megantic tragedy Transport Canada issued a series of emergency orders, including a requirement that at least two crew members must work trains that carry dangerous goods and no locomotive attached to a tank car filled with dangerous materials can be left unattended on a main track. The Railway Association of Canada also defended to the Canadian rail industry's improving safety record, emphasizing that the number of derailments, including those involving dangerous goods, is decreasing and also asserted that "99.9977" percent of all hazardous goods shipped by rail reach their destination without a release caused by a train accident, adding that the railway oil spillage rate is lower than for pipelines.

Accordingly, Canadian shipments of crude oil to the U.S. seem likely to increase.

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