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Crude oil exports from Canada to the United States are increasingly being shipped by rail due to the now chronic shortage of pipeline capacity that is only going to become more severe as Canadian oil output rises while pipeline capacity stagnates.
Bloomberg’s Robert Tuttle reports that Cenovus Energy and Imperial Oil are among the companies increasingly using oil trains to carry their heavy crude south of the border. The companies’ combined oil exports by train have tripled since last July, the report said, adding that a railway company now expects other producers to follow in their footsteps.
President Joe Biden canceled the federal permit for Keystone XL on his first day in office despite warnings from analysts, as well as Alberta’s Premier Jason Kenney, who said that killing Keystone XL would not diminish demand for heavy crude oil at U.S. refineries in the future. It could, however, raise America’s dependence on crude oil imports from OPEC, instead of imports from Canada, for the U.S. Gulf Coast.
“This is a gut punch for the Canadian and Alberta economies. Sadly, it is an insult directed at the United States’ most important ally and trading partner on day one of a new administration,” Alberta Premier Jason Kenney said after the decision to ax the pipeline was announced.
The province’s government is currently considering forcing Washington to pay it for the money poured so far into the project, which amounts to about $1.2 billion. According to an official from Premier Kenney’s office, Alberta may invoke terms in the North American Free Trade Agreement to recoup at least some of its expenses.
Meanwhile, research has suggested that transporting oil by rail rather than pipeline is riskier in terms of spills. At the end of 2019 and beginning of 2020, this was highlighted by two major oil train derailments that occurred within two months of each other in Saskatchewan.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.