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Canadian oil exports by rail increasing

More than 40 people died when a train carrying Bakken shale oil through Lac-Megantic, Quebec, derailed and exploded in 2013.

By
Daniel J. Graeber
Canadian oil exports by rail are at highs not seen since 2014, federal data show. File photo by Steven Frame/UPI
Canadian oil exports by rail are at highs not seen since 2014, federal data show. File photo by Steven Frame/UPI

Jan. 30 (UPI) -- With Canadian crude oil production up slightly, and given infrastructure limitations, federal data show oil exports by rail at a historic high.

The National Energy Board, the Canadian regulator, reported total oil exports by rail averaged 139,754 barrels per day in November, the last full month for which data are available. Nearly all of the oil exported from Canada heads to the U.S. market and, for the week ending Nov. 10, the four-week moving average for exports south was 3.1 million barrels per day.

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NEB data show the November average for exports by rail was the highest since November 2014, when the average was 150,960 barrels per day. The November 2017 average was 16 percent higher than the previous year. Total Canadian crude oil production for that month was about one-tenth of a percent higher than the same time last year, or about 7,100 barrels per day, and that oil needs to have someplace to go.

In November, pipeline company TransCanada closed down its Keystone network from Alberta after reporting a release of about 5,000 barrels of oil in rural South Dakota. The pipeline has been operating at about 80 percent of its full capacity since then.

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Even still, federal Canadian data show exports by rail for October 2017 was, at an average of 136,531 barrels per day, about 30,000 barrels per day higher than the previous year.

An accelerated rate of crude oil production in North America started straining existing pipeline capacity at least four years ago, forcing the industry to turn to rail transport to take up the slack. In July 2013, 47 people died in Lac-Megantic, Quebec, when a train carrying oil from the Bakken shale formation derailed and exploded.

Canadian transport officials introduced new regulations in the wake of the disaster aimed at increasing safety on the Canadian rail system. The measure from regulator Transport Canada started with an order to remove around 5,000 tanker cars designated DOT-111 from service almost immediately.

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Sandy Fielden, the director for oil and products research at Morningstar, said in a report it may be mid-2019 before new pipelines are in service in Canada, leaving rail as the mid-term stop gap, but the fleet of tank cars might be the limiting factor.

"The railroads are reluctant to commit resources to rail shipments that may quickly fizzle out when pipelines are built or expanded," he added.

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Federal Canadian data show that, between January and October last year, oil shipments by rail were up 59 percent from the same period in 2016.

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