Can’t go south, must go northWith no forward movement on Keystone XL and the project effectively in limbo, Canada is looking to forge ahead with other projects that would send its oilsands crude to market. So it looks north: recently, sea-ice surveillance and shipping company Canatec has performed some research, at the request of the Alberta government, that outlines proposed routes and methods for transporting crude from Fort McMurray to the Arctic, for onward shipment to Asia. A northern export route, coined the Arctic Energy Gateway, would utilise pipelines, rail and/or tankers to deliver the crude.
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Three projects were proposed by Canatec.1 The first would send diluted bitumen by rail from Fort McMurray to Hay River and then by barge up the Mackenzie River to Tuktoyaktuk. It would be stored here until summer, when ice melt would allow open water tankers to ship to Asia, Europe or eastern Canada. The second would use the existing Normal Wells pipeline, incorporated into a new pipeline from Fort McMurray, for delivery to Tuktoyaktuk. Thirdly, year-round production could be exported via a new 2400 km pipeline from Fort McMurray to Tuktoyaktuk directly.
The rail transport option is an interesting one. North America is seeing unprecedented usage of railway transport amid rising production and delayed pipeline projects. This month’s keynote article (‘Pipelines, oil boom and railroads’ by Jack Behar and Samer Al-Azem, Petrohab) explores the topic in detail, so turn to p.18 if you’d like to learn more about the recent return to railroads.
Back to the north and Generating for Seven Generations (G7G) are seeking permission to build a 2400 km railway line from Fort McMurray to Valdez, Alaska, to carry 15 million bpd of oilsands crude. The project has the support of First Nations groups, who would receive a 50% stake in the project and are satisfied that the route avoids inland waters. But the risks inherent in rail transport need no introduction, especially in the wake of two recent incidents: a 94 car crude oil train derailed in Ontario en route to Quebec and some 40 cars ignited; and a train derailed in rural Illinois carrying 630 000 gallons of Bakken crude.
The Centre for Biological Diversity called for a ban on moving oil by rail last month, as accidents and derailments increase in line with the burgeoning shale sector. We’re back to the pipelines vs rail argument, which I’ve heard framed as ‘pick your poison’, but the statistics clearly show that pipeline transport is the safer of the two options. Recently we’ve seen four oil train wrecks in North America within a three week period. The greatest increase in rail traffic comes from Bakken reserves to east coast delivery points. The incentives to move crude by rail this way are obvious: rail routes exist where pipelines do not. Last year, railroads moved 493 126 tank cars of crude oil in the US, compared to 407 761 in 2013. Just 9500 cars were filled in 2008 before the hydraulic fracturing boom took off in the Bakken region of North Dakota, Montana and Canada. Government tests show Bakken crude is more volatile than most crude oil, although the American Petroleum Institute says Bakken is no more volatile than other light, sweet crudes.
Last month, the US DOT quietly proposed a rewrite of oil pipeline safety rules (new gas pipeline safety laws came into effect after the San Bruno tragedy in 2010). Some 95% of liquids pipelines would need to comply with the PHMSA’s new Hazardous Liquids Integrity Verification Programme, which would demand that pipelines be given extensive tests to prove they can operate safely at their designated MAOP, and would require hydrostatic pressure testing, spike testing and possible pipe replacement in the event of a pressure concern.
The rules would provide more protection for people living along pipeline ROWs, which is laudable and worthwhile, but I wonder how many landowners are looking at railway tracks across their property and wondering when rail safety will be addressed with equal fervour?