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Alberta Turns To Trains To Move Its Crude

Crude oil

Alberta will discuss shipping more crude oil by rail across province borders with railways companies, Energy Minister Margaret McCuaig-Boyd told media in Calgary. The talks will begin tomorrow, with executives from the biggest oil producers in Alberta and the two biggest railways—Canadian Pacific Railway and Canadian National Railway.

Alberta’s oil producers are struggling to transport their crude as production increases while pipeline capacity remains unchanged amid wide-scale opposition, notably in neighbor British Columbia. There is also a shortage of oil train capacity as railway operators curbed their exposure to the oil industry a few years back when there was ample pipeline capacity.

Now they are reluctant to dedicate more oil trains to Alberta’s oilsands producers, but the producers are equally reluctant to commit to long-term contracts, which the railway operators insist on: pipeline transport is much cheaper than railway, and producers already have to deal with a serious discount for the crude to WTI because of the transport bottlenecks.

These bottlenecks are the reason Alberta has been fighting to get the Trans Mountain pipeline expansion built despite the staunch opposition of B.C.’s government. The province is even ready to buy the project from Kinder Morgan to make sure its oil producers have a way of transporting their crude as production is set to grow further in the medium term.

Related: Russian Oil Turns Its Back On Its Biggest Customer

British Columbia is equally determined in its fight against the pipeline, arguing it will put its environment at greater risk of spills. It has now approached the provincial Court of Appeals with a question about whether it can put the brakes on the federally approved project on the grounds that it has jurisdiction over the protection of its environment.

It is somewhat ironic that by opposing the Trans Mountain pipeline expansion, B.C. is inadvertently encouraging the transportation of oil by rail, which is a much riskier method. It was a rail train that caused the worst rail disaster in Canadian history.

By Irina Slav for Oilprice.com

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