What’s that old saying about when one door closes another one opens?
The door that has closed is the much ballyhooed Keystone XL Pipeline, which owner/operator TransCanada had pursued as the most efficient way to move oil from the Canadian Oil Sands basins in Alberta to US markets as far away as the Gulf Coast.
The door that is opening is for Canadian and US freight rail companies, which look to move the oil that the pipeline will not.
The original plan was for Keystone XL to carry heavy Canadian crude south from Hardisty, Alberta’s oil hub. However, it was blocked by President Barack Obama in late 2015, largely on environmental and (many would argue) political grounds.
Keystone XL advocates held up the promise of 20,000 jobs flowing from pipeline construction, and increased energy security. It would have added 830,000 barrels a day of pipeline capacity (a 20% increase). Pipeline foes pushed back, claiming that going ahead with a “dirty oil” project, coupled with the risk of pipeline leaks into local aquifers, was folly. The opponents won the day.
Nevertheless, cheap Canadian crude is on the move. According to the Canadian Association of Petroleum Producers, Canadian crude oil output is expected to rise by 5% to more than 4 million barrels a day in 2017. As a harbinger of the future, in April 2016 oil exports by train rose by 23%, the largest year-over-year spike since September 2014.
Hoping to gain from the Keystone XL bust, USD Group, Imperial Energy, and Cenovus Energy are constructing new rail terminals or plan to build out their existing facilities.
In a related story, earlier this year G Seven Generations was looking into launching a feasibility study to send trains full of oil sands bitumen from Fort McMurray, Alberta, to Alaska’s oil port of Valdez. The 2,400-kilometer railway journey would end with oil being loaded onto tankers and shipped to Asia. Under the proposal from G Seven Generations, First Nations would own 50% of the project.
If approved, trains could be shipping about 1 million barrels a day by 2020.
The door to increased rail transportation of Canadian crude seems to be swinging open.
British editorial veteran Stuart Hampton has been covering oil and gas companies for Hoover’s since the Neogene-Quaternary period. Well, actually, since the early 1990s. For the best overview of the oil industry and its history he recommends Peter Doran’s “Breaking Rockefeller” and Daniel Yergin’s “The Prize.” You can also follow Stuart on Twitter.