# 18 Pipeline protests cause widespread oil transport by rail

During the last few years there has been so much opposition to new pipelines that rail transport has increased rapidly’ By the end of this year there will be sufficient new loading stations and rolling stock to ship 1,000,000 barrels per day (bpd) from Alberta by rail. If it would all be destined to the Gulf Coast refineries we no longer need the Keystone XL pipeline which has an ultimate capacity of 830,000 bpd. Plans are underway to replace the Northern Gateway pipeline and the Kinder Morgan pipeline with a railway from Alberta to Alaska allowing shipment of 1,500,000 bpd through the under-utilized port of Valdez. The railways have certainly helped Alberta’s economy. Due to insufficient pipeline capacity they had to sell their oil at bargain prices. In 2012 they lost $ 25 billion. In 2013 the losses dropped to $20 billion and for the foreseeable future they will be $15 billion per year due to export restrictions to Asia. There are no figures readily available how much Ottawa loses in tax revenue but it must be billions, which could have been used to help the provinces with their financial problems.

While not all oil is as dangerous as the North Dakota type which caused the Quebec disaster, it is clear that transport by rail is riskier and takes more energy than transport by pipeline. This post gives an overview of the present rail developments and the objections to pipelines. I hope that public opinion about pipelines and marine transportation can as yet be changed.

1)     Replacement of the Keystone XL pipeline

According to an article in the June 9^th Macleans magazine there is a Calgary investment dealer, Peters and Co, who estimates there will be by the end of this year enough facilities in Western Canada to ship more than 1,000,000 bpd. They are an investment dealer that has specialized in the Canadian oil and natural gas, midstream, and oilfield services, Their findings are in line with 2013 predictions shown in http://www.bnn.ca/News/2013/7/12/Analysis-Late-to-oil-by-rail-Canada-faces-risks-in-rush-to-catch-up.aspx :

“In the United States, shipments swelled to almost 100,000 cars in the first quarter, some 760,000 bpd based on the 700-barrel cars that are standard for lighter oil shipments, according to American Association of Railroads data. Canada is poised to catch up. In 2013 rail shipment was 230 000 bpd.  New loading facilities in Alberta and delivery of rolling stock on order will soon increase the volume. Business News reports the advantage of bitumen "Every time we bring in another barrel of Canadian heavy crude, we make enormous progress with regard to reducing our raw material cost," PBF Chairman Tom O'Malley recently told analysts. The refiner aims to triple deliveries to 80,000 bpd by year's end with new rail cars. "That is the game.". The railroad costs are stated by “Gibson, which is signing up customers for a 60,000-bpd terminal in Hardisty, Alberta, estimates using a unit train would cut the cost of moving crude to the Gulf Coast to $14-$17 per barrel, compared with $17-$21 per barrel on a manifest train hauling mixed

cargo.”

Shipping to refineries rather than to ports is cheaper by rail than by pipeline. The bitumen does not have to be cooled and diluted. It can be loaded hot and shipped raw in insulated railcars with heating coils. No expensive concentrate is required and each car holds 30% more bitumen than if it was shipped as dilbit. At the refinery the bitumen is re-heated to 150^o C and pumped out. While Gulf Coast refineries  prefer our oil, the US has a glut of light crude and hopes that soon their export ban will be lifted. Canada is exempt from the export ban and already gets about 268,000 barrels of oil a day from the U.S. This is why North Dakota oil is shipped by rail to Eastern Canada for processing and export.

Here is another indication that major oil companies are planning to ship by rail.

Exxon to move Canadian crude by rail amid pipeline shortage

HOUSTON — With limited pipeline options to ship oil sands crude out of Canada, Exxon Mobil Corp. plans to move up to 100,000 barrels per day of Canadian oil using a new rail terminal that should be running by 2015, an executive said Thursday.

The terminal, to be constructed in Alberta, will cost up to $250 million if it is built to a maximum capacity of 250,000 barrels of oil per day, said David Rosenthal, Exxon Mobil’s vice president of investor relations, during a conference call with analysts.

Keystone XL: TransCanada will look at rail if pipeline is rejected

The rail terminal is being developed by Kinder Morgan and Imperial Oil at an initial cost of $170 million. Exxon Mobil has a 70 percent ownership stake in Imperial Oil.

2)     Replacement of Northern Gateway and Kinder Morgan pipelines

What follows was extracted from http://opinion.financialpost.com/2012/11/16/alaska-bound-rail-project-could-solve-canadas-oil-sands-problems/

An alternative to the 525,000 bpd Northern Gateway line and the additional  590,000 bpd Kinder Morgan line is a 1,500,000 bpd railway line from Alberta to Alaska. The extra capacity could be used to ship more oil to Asia or to the Gulf Coast refineries. When it is double tracked it could transport 5,000,000 bpd. Double tracking would also allow shipping potash, grain, lumber and minerals. It was original conceived by Alaska and the Yukon in 2005 and 2007 because oil shipments through Valdez were dwindling.  Following increased opposition to the Northern Gateway Pipeline the potential was further discussed with First Nations and an agreement has been reached. The present estimated cost is $8.4 billion for the single track and $ 10.4 billion for the double track. This is comparable to the $5.5 billion for the Northern Gateway and $ 4.1 billion for Kinder Morgan pipeline. An easement already exists for ¼ of the route (Fort Mc Murray to Peace River). Alaska is already investing in infrastructure in anticipation of approval. .An advantage is that every step in the planning is undertaken after thorough consultation with First Nations. Another advantage is that shipping from Valdez to Asia is 2-4 days less than through BC ports. Shipping to Valdez will cost $6-$8 per barrel compared to $5 per barrel for the Northern Gateway pipeline. Tanker shipment from Valdez costs $2-$3 per barrel to Asia, $3-$4 per barrel to the Gulf coast and $ 4-$6 per barrel to Europe.

nrunfailco.com/ESW/Files/G7G_Project_Update_Jan-3-2013.pdf

reports that the $6 Million study of 2005-2007 has been updated  and will be followed by a $40 million feasibility study which will hopefully receive 25% financial support from the Alberta government.

The  February 2014 edition of the Alaska journal http://www.alaskajournal.com/Alaska-Journal-of-Commerce/February-Issue-2-2014/Report-due-in-March-on-Canadian-Alaska-oil-railroad-link/ reports that the Alberta government is funding a $1.8 million pre-feasibility study through the Van Horne Institute at the University of Calgary. Some more details are given about oil quality requirements and the degree of under-utilisation of the port.  TAPS owners, which include BP, ConocoPhillips and ExxonMobil, have said they are interested in shipping more liquids through the pipeline, which is now operating at about one-fourth of its design capacity

In February 2014 news came out that the 1.5 million barrels per day could be shipped by 10 trains. It also explains the First Nations involvement.  

http://fuelfix.com/blog/2014/02/04/canadian-group-pitches-alaska-rail-line-for-oil-sands/

The idea of shipping a million barrels of sticky bitumen a day via a rail line is unprecedented. Jean-Francois Arsenault, of the Ottawa-based infrastructure development firm, told the Edmonton Journal last January that G7G’s single-track version of the project would require 10 trains a day, each pulling 200 cars, to transport 1.5 million barrels.

Vickers said researchers at the University of Alaska Fairbanks and the University of Michigan are investigating the potential for the railroad to transport minerals from Yukon mines.

AECOM Canada, a technology company, has already said it wants 10 percent equity in the project, according to Vickers’ presentation. First Nations tribes and the six tribes between the border and Delta Junction would hold a 50 percent stake in a so-called Aboriginal Alliance Trust. The trust would disseminate dividends among the tribes. The remaining 50 percent would be held by G7G.

3)     Environmental objections to pipelines

A main objection, in particular from Europe is that the extraction of oil in Alberta takes a lot of energy and that with our projected expansions we will not meet our Copenhagen agreement. We already failed miserable with our Kyoto accord and by pulling out we upset their carbon trading system. For details of our environmental records see point 8 in post 1. Our failure to become serious about pricing of carbon is a main objection, now shared by the US which is much further ahead than we are and will in all likelihood meet their Copenhagen agreement which is identical to ours.( see post 16 “carbon tax progress”)

 

In BC environmentalists and local politicians reject the pipelines and make the public feel guilty by stating that our oil exports increase the world’s greenhouse gas emission, see http://www.vancouverobserver.com/blogs/climatesnapshot/carbon-tsunami-lead-enbridge-northern-gateway-takes-aim-bc and http://www.vancouverobserver.com/news/vancouver-s-green-brand-be-blackened-oil-pipelines-says-mayor#comment-260670 They overlook that world demand for oil will keep rising for quite a while and that the emissions will go up regardless which country supplies the oil. Taxing carbon will eventually ease the flow. Taxing will however have far more impact on coal than on oil. At the BC tax rate of $30 per tonne of CO₂ the price of thermal coal will go up by about 70%, while crude oil goes up by only 9% (see post 17, cost of taxed oil and coal, windpower progress)

 Drastic reduction in the use of thermal coal is the solution to reduce the world’s greenhouse gas emission. Natural gas produces only about half the CO₂ emissions than coal does. By forcing all power stations to switch from coal to natural gas the world’s emissions will drop substantially. In the US a newly introduced EPA bill tries to achieve that. Now even some influential Republicans feel that a revenue neutral carbon tax will work better, see http://www.jsonline.com/news/opinion/revenue-neutral-carbon-tax-would-improve-on-epa-regulations-b99282755z1-261548361.html

 The Sanders Boxer Bill which at $20 per ton of CO₂ includes provisions for border tax adjustments (Import duties) to encourage other countries to follow the US lead may be the answer see http://www.carbontax.org/blogarchives/2013/02/15/sanders-boxer-set-gold-standard-but-write-off-fiscal-potential-of-carbon-tax/.  Shell, BP Exxon Mobil and Statoil demand a global carbon tax. They have vast reserves of natural gas and will profit by selling it for power generation. The tax will encourage development of green energy so that eventually all energy required to extract the Alberta oil will be obtained from green sources. Some people claim that it takes the equivalent of one barrel of oil to extract one barrel. That number is disputed and certainly does not apply to all Alberta oil. Furthermore some US oil requires just as much energy seehttp://insideclimatenews.org/news/20130219/oil-sands-mining-tar-sands-alberta-canada-energy-return-on-investment-eroi-natural-gas-in-situ-dilbit-bitumen

In Canada there is quite some opposition to carbon tax. People still believe that it costs them money, that it is bad for the economy and that it will hurt the poor. That is certainly not the case in BC, where the government has to show each year how much money was collected and how it was all refunded to those who paid the tax. Those who buy less than average carbon get more money back than they paid. This can be achieved by driving fuel efficient cars and using a heatpump system to keep their house warm.  At the moment there are 16 refund categories see http://www.fin.gov.bc.ca/tbs/tp/climate/Carbon_Tax_Report_and_Plan_Topic_Box.pdf Note that in 2013/2014 the poor got a refund of $ 195,000,000 via the low income climate action tax credit. That is over 16% of all carbon tax collected.

4)     Opposition to pipelines and tanker transport based on past disasters

 Enbridge has had many serious leaks in their lines. The most catastrophic one is the Kalamazoo spill. It was caused by inadequate leak detection instrumentation and poor maintenance. The industry relied on internal instruments which in the US detected only 5% of the leaks between 2002 and 2012. These internal instruments only detect leaks larger than !½ % of the flow and even misses some of the large ones because there are so many false alarms that the real ones can be misinterpreted as happened during the Kalamazoo spill from line 6B, causing a 17 hour shut-off delay.  Here are some details of the cracks which caused the rupture. They are part of a NTSB  investigation led by Mr Nicholson  “The spill from Enbridge's 6B pipeline was caused by multiple small corrosion-fatigue cracks in the pipe that grew in size, linked together and created a rupture over 80 inches long when the pipeline's pressure was increased.” About 15,000 cracks were discovered in Enbridge pipelines, according to a 2005 crack report, Nicholson said. Enbridge tried to manage these defects by prioritizing them by immediacy. The NTSB report also shows that the tools used to measure cracks were inadequate for the type of cracks in Pipeline 6B. “Federal regulators never fully reviewed or drilled the company on its spill response plan”.

During the inquiry of the Northern Gateway pipeline all efforts were made to exclude the above findings from the discussions. It would have been an ideal opportunity to show how much extra work will be done to avoid repetition of such disasters and how important it is to have strict regulations about crack detection and repair. The government should also be willing to provide sufficient trained staff to oversee that all those rules are followed.

The Northern Gateway pipeline has many features which will make the line one of the safest in North America. The trouble is that most of it only shows up on blogs. Last year I had 3 email exchanges with Enbridge suggesting that they make far more technical information available to the public and explain how all the previous problems can be overcome. In the process I learned something about pipelines and wrote what is now post 1 of www.neilwilhees.blogspot.ca On  1 September 2013 I emailed post 1 with all the backup data to Enbridge with the following note . “Having seen how much opposition there is based on past problems I have included at the end of my article a number of questions which may change opponents ‘ minds if you can once in a while point out how things have improved on specific points.” Enbridge’s reply on !0 September 2013 was “Thank you Neil - we appreciate your support!”.

When you read points 12, 13 and 14 of post 1 you will see that a lot more public discussion is required to make the pipelines acceptable. Point 14 also includes unanswered questions about the tanker transport. Further data are shown on post 4 “Oil spills from tankers” and many regulations and references are shown on post 15 “How safe is the Northern Gateway tanker traffic”. I have seen many arguments against pipelines and the Exxon Valdez disaster is often mentioned as an example of environmental impact. A lot has changed since that time and we must be prepared to pay quite some extra money to ensure that everything will be done safely.  The extra cost will still be insignificant compared to the $15 billion we lose every year because we can’t easily access the Asian market. Like for the pipeline itself, a lot more details have to be published by the main media to make the project acceptable to the public.