TransCanada and other supporters of the pipeline say that it offers the safest alternative and is best from a climate perspective because it uses less energy to transport the oil. But if producers end up using rail to Cushing, they could feed into the southern leg of the Keystone XL, which TransCanada is almost half done building. It obtained permits for that section from the Army Corps of Engineers last year.
During a visit to Washington late last month, Alberta’s premier, Alison Redford, warned that transporting crude by rail “will have higher environmental impacts” and would not be able to handle all the oil the region is producing.
“I would be quite concerned if people were taking the view that if Keystone wasn’t built, we will be fine because rail would fill the gap,” Redford said.
Sending bitumen from the oil sands by rail is costly — about $15 to $20 a barrel, versus $7 to $11 by pipeline, according to the research firm Peters.
But it provides some offsetting savings because the producing companies don’t need to dilute the molasses-like bitumen as much as they would to send it through a pipeline. Alberta is importing diluent or condensate — two lightweight petroleum products — to blend with the bitumen. Peters estimates that with rail capacity of 500,000 barrels a day, the province would cut diluent and condensate demand by 100,000 to 150,000 barrels a day.
Rail also offers flexibility and speed. Rail can carry oil from the Bakken region to the Gulf Coast in five days, according to a December 2012 slide presentation by Plains All American Pipeline, which owns both pipelines and railways and is doubling its U.S. crude oil rail capacity.
Some companies are using a variety of transportation methods to get their crude oil to markets.
Last year, Southern Pacific Resource said it would truck bitumen from its oil sands project 38 miles to a CN rail terminal south of Fort McMurray. From there the oil would travel 2,800 miles over CN’s network to a terminal in Natchez, Miss. There it would be transferred to barges for delivery to Gulf Coast refineries.
Bill Day, spokesman for Valero, the largest U.S. oil refiner, said the company strongly backs the pipeline.
“In the meantime,” he said, “the economics of using ample supplies of North American crude are compelling us to seek other ways of getting it to our refineries.”