Canada's high stakes choice: Oil by rail or by pipeline?

Despite the cancellation of a high-stakes meeting between the premiers of B.C. and Alberta Tuesday, the option of transporting oil from Alberta to the coast by rail remains a hot topic.

But a recent slew of sensational derailments and crashes involving rail cars carrying oil and petroleum products — including a fiery explosion in Alberta last month involving a train bound for Metro Vancouver — is raising concerns about a potential human or environmental disaster in B.C.

Premier Christy Clark and Alberta Premier Alison Redford are grappling with how to open new markets for oil in Asia. Clark wants assured economic rewards and world-leading spill prevention and response systems before B.C. will say yes to oil pipelines.

With rail shipments of oil and petroleum products already on the increase in B.C. — and poised to escalate dramatically in the absence of new pipelines — local politicians fear the consequences of a major oil-related train derailment or crash in the region.

“This issue is only now coming to the fore,” said Belcarra Mayor Ralph Drew, who wants Metro Vancouver to ensure that Kinder Morgan’s pipeline expansion plans respect the ecology of Burrard Inlet.

“It’s one thing to ship tanker cars on the Prairies flat and straight, but coming through the mountains, in my view that’s the worst possible scenario. It’s an order of magnitude, or more, increase in the level of concern, for sure,” Drew said.

“I’d get far more excited about rail cars transporting oil into the Lower Mainland than pipelines.”

The pipeline-versus-rail debate may be lost on anyone opposed to increased tanker traffic, regardless of how Alberta oil gets to B.C. ports.

“The recent discussion between Alberta and B.C. where they seem to be indicating that we need to build pipelines or it will just come by rail — I view that as a negotiating tactic: ‘Give us our pipeline, or we burn your cities to the ground,’” said Greenpeace researcher Keith Stewart.

Railways were involved in 166 accidents last year in B.C., including 33 collisions with people or vehicles, according to federal Transportation Safety Board reports. Of the total, 91 were derailments, down from 99 in 2011 and 142 in 2008.

On Nov. 28 last year, a CN freight train moving cars in Fort Nelson derailed a tank car loaded with diesel fuel. The car fell on its side and killed the conductor.

Transport Canada estimates almost 1,200 carloads of crude oil and petroleum products were sent to B.C. in 2012, up from fewer than 50 in 2011 and “an insignificant number of carloads in every year before that,” said spokeswoman Sara Johnstone.

That is a drop in the barrel compared with the prospect of hundreds of thousands of rail cars delivering oil to the B.C. coast in the absence of new pipeline construction. “With the increase in oil production and with the North American pipeline network operating near maximum capacity, transportation of oil by rail is increasing,” said Johnstone, noting federal safety regulations have also been beefed up.

Which poses the question: how real is the possibility of large-scale oil-by-rail shipments to the coast for export?

While there is no port infrastructure in place in B.C. for off-loading rail-delivered oil for export to Asia, industry observers say it remains a possibility.

The B.C. government has stated that both pipelines and rail are viable methods to get oil to the coast for export. And the province said recently that if pipelines are not built, rail will fill the void.

That would result in an enormous increase in rail traffic, and likely increased environmental and safety concerns.

To replace Enbridge’s proposed $6.5-billion Northern Gateway pipeline, 275,000 rail cars a year would need to be added to the northern B.C. route to Kitimat or Prince Rupert. An additional 300,000 tanker cars would be needed to replace the oil capacity of Kinder Morgan’s planned $5.4-billion Trans Mountain pipeline expansion to Burnaby.

It would require a terminal on the coast at a cost of $200 million to $500 million, according to the Canadian Energy Research Institute.

The ports of Prince Rupert and Metro Vancouver say they are not aware of any plans to build such a terminal.

In an email response this week, Canadian National Railway spokesman Mark Hallman said the company has no plans to move any oil to B.C. ports or terminals for export.

But earlier this year, CN president Claude Mongeau said the railway did not carry crude oil to the West Coast simply because no customer has yet asked them to do so. He made the statement in a letter he wrote responding to environmental groups over their safety concerns.

“But if infrastructure was permitted for this purpose on the West Coast and a request was made to CN, we would respond and do what our business mandate and common carrier obligations call for — move these products as safely and efficiently as we can for the benefit of all Canadians,” Mongeau wrote.

Internal federal government memos published earlier this fall showed CN, at the urging of Chinese-owned Nexen Inc., was considering shipping Alberta bitumen to Prince Rupert in northwest B.C. by rail as a possible Plan B if the Northern Gateway is blocked.

Research by the Seattle-based Sightline Institute shows that since 2012, nearly a dozen plans have emerged to ship crude oil by train to Pacific Northwest refineries and port terminals. Those include plans for a $75-million to $100-million rail complex in Vancouver, Wash. capable of handling 360,000 barrels of oil.

U.S. crude must be refined before it can be exported, but there would be no such rules for bitumen from the Alberta oilsands, noted Seattle Institute researcher Eric de Place. He was not aware of any plans to build terminals on the B.C. coast.

While it is more expensive to ship oil by rail than pipeline, rail has advantages.

A large export terminal would likely be subject to a federal environmental review but there is no such requirement for moving oil by rail. The upfront capital costs for moving oil by rail are also lower.

The advantages and disadvantages were discussed in a recent Canada West Foundation report, Pipe or Perish: Saving an Oil Industry at Risk.

“You have to optimize across all of those factors to determine which one is best,” says Len Coad, director of the foundation’s Centre for Natural Resources Policy. “But until recently, the preferred alternative was almost always pipeline.”

The federal review decision on Northern Gateway will influence oil-by-rail decisions, Coad noted.

Geoff Morrison, spokesman for the Canadian Association of Petroleum Producers, said he’s not aware of any specific plans to bring oil by rail to B.C. but he expects companies are looking at the opportunity.

“When the market sees a pinch point, it looks for another way to get there,” he said, referring to the inability of western Canadian oil producers to access Asian markets.

“When does a gleam of an eye become an idea? I think we are in that kind of conceptual moment where people are looking at all their options,” said Morrison.

Oil is definitely on the move by rail across North America.

Canadian Pacific Railway moved about 13,000 carloads of crude oil in 2011, 53,500 carloads in 2012, and expects to move 90,000 in 2013, most of it shipped to the Gulf Coast and U.S. northeast.

In comparison, CN moved about 5,000 carloads of crude oil (heavy crude, light crude and pure bitumen) in 2011, increasing six-fold to more than 30,000 carloads in 2012, with the potential for business to double to more than 60,000 in 2013.

And even in the absence of port infrastructure for exporting to Asia, crude oil is coming to B.C. by rail.

Hallman said CN transports crude oil to Metro Vancouver for local refinery production and to New Westminster, where it is interchanged with U.S. railroads. Hallman noted that “none of this crude oil is moving to B.C. ports or terminals for export.”

The Chevron refinery in Burnaby built a facility just last spring to specifically off-load oil delivered by CPR along the same tracks used by the West Coast Express commuter train.

Chevron currently off-loads eight to 14 rail cars per day, representing 15 per cent of the refinery’s current crude oil requirement of 55,000 barrels per day, said Chevron spokesman Ray Lord.

The West Coast Express route runs through urban communities on the north side of the Fraser River from Mission west through Maple Ridge, Pitt Meadows, Port Coquitlam, Coquitlam and Port Moody, where it hugs the south shore of Burrard Inlet through Burnaby, past the Chevron refinery, to its terminus on the downtown Vancouver waterfront.

CN also delivers crude oil to a transloading facility in Langley, where the oil is loaded onto tank-trucks and delivered to the Chevron refinery at the rate of 18 tank-trucks per day, representing 10 per cent of the refinery’s requirement. There is capacity to off-load up to 24 trucks per day.

The other 75 per cent of the refinery’s crude oil comes from Kinder Morgan’s Trans Mountain pipeline system.

Chevron’s Lord confirmed that oil-filled rail cars bound for the Langley facility — and eventually the refinery — were part of the CN train that crashed and burned Oct. 19 in the hamlet of Gainford, Alta., about 85 kilometres west of Edmonton.

Of 134 rail cars in the train, four carrying crude oil and nine carrying liquefied petroleum gas derailed, sparking a dramatic explosion. No one was injured, but homes to about 100 people in the area were evacuated.

CN’s Hallman cited statistics from the Association of American Railroads suggesting 99.997 per cent of “hazardous materials carloads moved by railroads arrive at their destination without a release caused by an accident.”

He refused to disclose where the rail cars of refined petroleum gas in the Gainford crash were headed.

“Railways in general, including CN, do not own rail tank cars; the vast majority of tank cars are owned by leasing companies or rail customers to ship products,” Hallman said.

He added that “DOT-111 tank cars for crude oil and ethanol ordered after October 2011 meet higher standards” and that “nearly 25 per cent of tank cars used to move crude oil today were built to higher specifications.”

Added CP spokesman Ed Greenberg: “CP continues to meet or exceed all federal operating and safety regulations and rules, which includes a strict inspection protocol for the thousands of miles of track over which we operate and a rigorous inspection and maintenance program for all of our trains.”

The most serious recent accident occurred July 6, 2013, when a runaway train of 72 tank cars loaded with crude oil crashed in Lac-Mégantic, Que., killing 47 people and destroying half the downtown area. The train was owned by Montreal, Maine & Atlantic Railway.

“After Lac-Mégantic, everybody across the country is at a heightened sense of vigilance with respect to the transportation of hydrocarbons,” Dan Holbrook, Transportation Safety Board western regional manager of rail investigation, said in an interview.

The good news about the Alberta crash is that the four derailed cars carrying crude oil that did not rupture had full or partial “head-shield protection” — an extra layer of steel to guard against punctures in a crash or derailment, he said.

Main-track derailments, where speeds and risks are greatest, have been declining in Canada, said Holbrook, attributing the trend in part to increased automated track inspections of bearings and wheels, as well as distribution of locomotives to better manage power and braking.

Metro Vancouver has not debated the threat posed by increased rail shipments of oil through the region, but is due to receive a report on Trans Mountain’s expansion plans at the environment and parks committee meeting on Nov. 14.

Serious rail accidents in Canada since May 2013:

Oct. 19: Thirteen CN tanker cars — four laden with crude oil and nine carrying liquefied gas — came off the rails just after midnight in the hamlet of Gainford, about 80 km. west of Edmonton. A massive fire ensued.

Oct. 17: Residents in the northwest Alberta town of Sexsmith were forced from their homes after four CN rail cars carrying anhydrous ammonia left the rails. The cars remained upright and there were no leaks.

Oct. 7: Four empty tanker cars that had been used to carry jet fuel went off the track in Brampton, Ont. A CN employee suffered minor injuries and the derailment caused commuter delays for GO Train travellers.

Sept. 25: Seventeen CN rail cars, some carrying flammable petroleum, ethanol and chemicals, came off the tracks near the village of Landis, in western Saskatchewan, in the middle of the night. A nearby school was closed as hazardous material crews cleaned up spilled oil. No one was injured.

Sep. 11: Eight cars of a CP train carrying a diluting agent used in oil pipelines derailed at a southeast Calgary rail yard. There were no injuries and no leaks from the cars, which were left lying on their sides. More than 140 homes were evacuated briefly.

July 27: A CP locomotive and seven tanker cars carrying oil left the tracks in Lloydminster, which straddles the northern Alberta-Saskatchewan boundary. Some diesel spilled from the locomotive and was contained. RCMP said nothing spilled from the cars, no one was injured and no evacuations were necessary.

July 8: An ammonia leak from a train caused the evacuation of roughly one-quarter of the population of the small northern Ontario town of Gogoma. No one was injured.

July 6: A runaway train of 72 tank cars loaded with crude oil crashed and exploded in the centre of Lac-Mégantic, Que., killing 47 people and destroying half the downtown area. The train, owned by Montreal, Maine & Atlantic Railway, was unmanned at the time.

June 27: Seven cars derailed as a bridge over the flood-swollen Bow River in Calgary collapsed when a CP train tried to cross it. Five cars carried petroleum products, one was filled with ethylene glycol and one was empty. No spills or injuries were reported but Calgary Mayor Naheed Nenshi demanded answers.

June 2: Eleven CP rail cars derailed on a trestle bridge near Wanup, east of Sudbury, Ont. There were no injuries, but the cars were carrying containers of consumer goods and about half of them entered a nearby river, prompting a drinking-water advisory.

May 21: Five cars on a CP train derailed near the village of Jansen in southeastern Saskatchewan and one of them spilled more than 91,000 litres of oil. There were no injuries.

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