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What's best way for oil to find way to market?

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When a runaway oil train exploded in a small Quebec town last week and killed some 50 people, the news coverage rightly focused on the awful loss of life and the carelessness that apparently caused the disaster.

In the days since, though, attention has turned to a second point: What was a train full of oil, from a field 3,000 kilometres away in the western U.S., doing in Eastern Canada? Isn't that what pipelines are for?

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Good question. The answer is there has been a huge, but little-noted, boom in the use of railroads to transport oil. The oil that devastated Lac-Mégantic, Quebec, for example, came out of the Bakken field in Montana and North Dakota, where production has surged in an area with little pipeline infrastructure.

Trains go places pipelines don't, and railroads can quickly expand capacity without the regulatory obstacles that slow or block new pipelines. U.S. oil shipments by train are up almost 50 per cent over last year, according to the Energy Information Administration.

In comparison with trains, pipelines move oil more efficiently and cheaply, but when they break, they spill more oil. Train accidents tend to spill less oil, but the fatality rates for train accidents are higher than for pipeline mishaps.

This surge in oil train shipments has big implications, not least for the seemingly endless controversy over the proposed Keystone XL pipeline, which would bring oil from huge oilsands deposits in Western Canada to terminals in the central U.S.A. Keystone needs approval by the State Department, and ultimately by U.S. President Barack Obama, because it crosses the U.S. border. The process has dragged on for years; a final decision could come later this year.

As we've argued previously, Keystone deserves to be approved. It would provide a secure new source of crude for a nation that still imports about 36 per cent of its oil. And if the pipeline is not built, the oil won't stay in the ground. It will find its way to other places by other means.

Environmentalists insist blocking Keystone would limit or stop production of oilsands oil, but growing evidence suggests that won't happen.

Not only are producers able to use trains, there are proposals to expand or repurpose two existing Canadian pipelines that would carry oilsands oil either west to Pacific Rim markets or to the east. The Bakken oil was headed for a refinery in Eastern Canada.

Obama said recently Keystone should be approved only if it did "not significantly exacerbate" greenhouse gas emissions. Interestingly, an initial analysis by the State Department concluded exactly that, reasoning that if Keystone were not built, the oilsands oil would be sold anyway.

Critics have attacked the report, and their critiques have some merit. Pipeline politics in Canada is also difficult, and shipping oil by train is up to three times as expensive as pipelines. But those are details.

The Lac-Mégantic crash is a tragic reminder that whether it comes from U.S. fields or Canada's oilsands, oil will find a way to market one way or another. The best outcome is for that market to be here.

Republished from the Winnipeg Free Press print edition July 15, 2013 A9

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