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Daniel J. Graeber

Daniel J. Graeber

Daniel Graeber is a writer and political analyst based in Michigan. His work on matters related to the geopolitical aspects of the global energy sector,…

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Rail v. Pipelines: No Safe Bet for Oil

The Canadian government said it was committed to a safe rail transit network following a weekend derailment in a Quebec town near the border with Maine. At least five people were killed Saturday when a train carrying crude oil from North Dakota slipped the track and exploded in Lac-Megantic. The federal government said it was in charge of the investigation, though it was unclear what initially led to the incident. Oil deliveries by rail have increased along with North American crude oil production. In a tit-for-tat season of pipeline and rail incidents, it's becoming clear there are no clear-cut winners for crude oil transit.

MMA reported Sunday the fires associated with the weekend derailment were mostly extinguished. Provincial and federal authorities are in charge of the investigation, though the rail company said it believed the air brakes holding the freight in place were released. Canadian Transportation Minister Denis Lebel said the agency wouldn't hesitate to take appropriate action to highlight the government's commitment to safety.

"Safety is our top priority, day-in and day-out," he said.

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

The MMA line was carrying about 50,000 barrels of oil from the Bakken shale play in North Dakota to an oil refinery in New Brunswick at the time of the accident. Oil deliveries by rail have increased steadily in North America because pipeline capacity can't keep pace with production gains. The American Association of Railroads reported rail deliveries for petroleum and petroleum products increased 26.6 percent in the last week of June year-on-year. Overall freight transit by rail was down, however, including in Canada, highlighting the increase in oil-by-rail shipments. Maine railways alone hosted 30,000 barrels of oil per day, an increase from the 2,000 bpd reported last year.

The U.S. State Department's draft review of the Keystone XL oil pipeline said existing rail infrastructure should be considered when assessing the project's national interest. Both sides of the rail-versus-pipeline debate have their fair share of opponents. Activists from Maine were arrested during opposition to rail infrastructure across the border in Quebec. Keystone XL opponent Bold Nebraska said it was standing by county legislation in Nebraska opposing so-called tar sands and crude oil pipelines.

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

Advocates of pipeline deliveries said it's the most secure form of oil transit available, though pipeline accidents are far more severe in terms of spill volumes. The Canadian government said it was taking action to ensure rail and pipeline networks were secured. The Maine government, for its part, said there would be no setback for crude oil deliveries through the state. MMA, meanwhile, said it can't even determine what led to the accident because of the Canadian government's probe.

North American oil is going to be delivered to national refineries one way or the other because of technological breakthroughs in drilling. With production gains, accidents like last weekend's may become the new North American normal for oil.

By. Daniel J. Graeber of Oilprice.com




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