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Canada Transport Ministry Fast-Tracks Crude Oil Rail Car Phase-Out

Crude by rail

Canada’s transport ministry will fast-track a phase-out of two models of rail cars for the transportation of crude oil and condensate as oil exports by rail hit record levels, the Minister of Transport Marc Garneau said in a statement.

The phase-out will involve all DOT 111 tank cars and unjacketed CPC 1232 cars—cars without thermal protection—and will take place by November this year, instead of April 2020, for unjacketed CPC 1232 cars that carry crude, and by January 2019, instead of April 2025, for DOT 111 cars and COPC 1232s for condensate shipment.

The move has been prompted by the strong increase in oil and condensate shipments by rail as Canada’s pipeline network is insufficient to handle the increased production, which necessitated, as per the statement the removal of the “least crash-resistant rail tank cars for crude oil and other dangerous goods” sooner than initially planned.

Canadian crude-by-rail exports jumped to a record in June 2018, exceeding 200,000 bpd for the first time and nearly doubling compared to June last year, Canada’s National Energy Board (NEB) said in its latest crude oil exports data, in a sign that Canadian producers are increasingly using the railroad option to move their crude to market because pipeline capacity out of Canada is full.

The initial deadline for the phase-out of the two types of tank cars came after the 2013 oil train disaster in Lac-Megantic. Following the tragedy, both Canada and the United States tightened their rail car safety standards to avoid another accident of this kind. However, when the initial phase-out deadlines for DOT 111 and CPC 1232 cars were approved, Canada was pumping a lot less crude and pipeline capacity sufficed. Now, with production on the rise as prices recover, pipelines are not enough.

Oil shipments by rail will continue to grow in the future as well: there are no new oil pipeline projects in progress. The only one that won the approval of the federal government, the Trans Mountain expansion project, has been delayed once again following a court ruling suspending all work on it.

By Irina Slav for Oilprice.com

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