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Lack Of Pipeline Capacity Could Force Down Canadian Crude Prices

Lack Of Pipeline Capacity Could Force Down Canadian Crude Prices

With current pipelines operating near…

The Natural Gas War Burning Under Syria

The Natural Gas War Burning Under Syria

Qatar, a leading natural gas…

Pipeline Companies Claim Rail is Unsafe after Disaster in Quebec

2,000 people from the town of Lac-Megantic, in Quebec, were evacuated early on the 6th July after several railway cars carrying oil derailed and caught fire, killing five and leaving another 40 people missing.

The rail company Montreal, Maine & Atlantic was carrying a shipment of oil to the Saint John refinery in New Brunswick, when the accident occurred.

Firemen fight to control the blaze that engulfed around 30 buildings
Firemen fight to control the blaze that engulfed around 30 buildings. (Google)

Related article: Why Oil Will Stay Strong for Some Time to Come

Pipeline companies, who had been losing the battle with transporting oil by rail, have now found that the accident has given them new life in the debate, and are stating that this is proof of the dangers that rail offers over pipelines.

John Stephenson, a fund manager with First Asset Investment Management Inc., told Bloomberg that “people think rail is costless until something like this happens. This is another data point that shows how much costlier and riskier rail is compared to pipelines and will probably move Canada closer to having an energy strategy.”

The Association of American Railroads explains that over the years, as oil production throughout North America has grown, a lack of pipeline infrastructure, coupled with a resistance to build more, large pipes, has led to an increase in the volume of oil transported via rail to record levels.

Pipeline companies, such as TransCanada Corp., have tried to argue that railroads are more dangerous than pipelines, as they search for approval to build new infrastructure. Steven Paget, the director for institutional research at First Energy Capital Corp., believes that “we are likely to see increased dialogue on whether or not crude-by-rail is a safe alternative to pipeline transportation.”

Related article: Nabucco is Dealt Another Blow as Azeri Gas to Use TAP Pipeline

Arthur Salzer, the CEO of Northland Wealth Management, stated that “it’s been a real shame that a lot of the public and especially the activists have pushed the public to sway so much from pipelines which are likely much, much safer over time. It is going to be something that’s going to weigh on the public’s mind.”

When making claims that railroads are riskier than pipelines, we must admit that the margins are not obvious. Bot deliver more than 99% of the products entrusted to them without any incident. The Association of Oil Pipelines said that in 2012 US pipelines carried 474.6 billion gallons of oil, spilling 2.3 million gallons; just less than 0.0005 percent. For the entire decade ending 2012, 11.2 billion gallons of crude was hauled by railcar, spilling 95,256 gallons; 0.00085 percent, and 81,103 gallons were from one large spill in Oklahoma in 2008, without which railroads with actually be safer spilling just 0.00013 percent.

By. Charles Kennedy of Oilprice.com



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