Wednesday, June 5, 2013

The economics of moving oil by rail are already proven viable

On Monday (June 3rd) I wrote a post entitled, "Could this in fact be the real reason, for the BC Liberal government, to be declaring they will not agree to the Northern Gateway Pipeline proceeding"  

Journalist John Twigg
The post led to a number of people making comment about it on Facebook -- and to me personally by email.  One of the responses I received came from John Twigg, who has a long history in BC's political arena, as a commentator, and a journalist.

I asked if I could share his response and he agreed.  This is what He had to say:

Thank you for sending me a copy of your opinion piece below on the Northern Gateway pipeline situation, which was about the first thing I opened and read when I downloaded my email tonight because of the teaser reference to a railway outcome.

I could quibble in a few places but generally it's a thoughtful piece and something that was a pleasure to see coming from the perspective of an Interior conservative citizen. But there's always a but and it has to do with this line:

"I for one have to think that moving the oil through a pipeline would be far safer than it would be by rail car"

Did you do any research on that? Did you read any of my blog posts in the last year or so about the great potential for using rail cars to move Alberta bitumen - but to Prince Rupert rather than Terrace? Did you read any of the handful of other op-ed and news pieces about this concept? Do you recall seeing any tweets with links to industry and MSM articles on oil shipments by rail, such as happening now from southern Saskatchewan to Texas?

In other words, the economics of moving oil by rail are already proven viable and in the Alberta bitumen case they have the added huge advantage of infrastructure being mostly already in place! Namely that the CN Rail mainline to Prince Rupert is already at world-class standards and its running rights are in place and not subject to Indian Land Claims or Environmental Reviews - the only items needed are loading and unloading terminals and spaces for those are already readily available.

Safety? Perhaps you were influenced by the latest news of a Canadian Pacific Railway freight train plunging through a bridge near Sudbury, but did you hear any reports of dire effects? No, because rail car spills tend to not have catastrophic events like say the Kalamazoo spill, though of course accidents can still happen with rail cars carrying flammable materials.
But again one of the advantages of rail-car movements of Alberta bitumen is that they would need less diluent or perhaps even no diluent whereas the Northern Gateway would need so much diluent that they are (or were?) planning to build a small twin pipeline to carry diluent only from Kitimat back to Fort McMurray because it is so costly and scarce that it has to be extracted and re-used.

Now imagine if that diluent line was to have a bad break along with the bitumen line and they were to catch fire, which could happen in a variety of scenarios, and imagine it was near a major river or salmon-spawning-stream crossing - you and we would be talking about something far worse than Kalamazoo!  But a rail car or two carrying only bitumen going off the rails might not even break open let alone flow into a cold river....

I've recently learned that there's also a whole bunch of modern technology to prevent derailments, notably sensors that detect "hot boxes" when trains pass by, i.e. wheels that for some reason are over-heating.

Anyway, I think you should reconsider your assumptions about the northern oil pipeline, and furthermore your BC Conservative Party probably needs to review its blanket pro-pipeline policy too because it's obvious to most B.C.ers in almost all parties that the Enbridge pipeline proposal has numerous flaws (the worst feature IMO would be the use of Douglas Channel for large oil tanker ships because the navigation is hazardous and the environment pristine, but I also worry about the diluent pipeline crossings being too hazardous too, i.e. not worth the risks).

I can understand why you and many other people would assume that pipelines are better than railcars because they are safer and more efficient, because for one reason that is also the industry propaganda line, but actually with bitumen the railway would actually be a faster mover than the pipeline and maybe even more energy-efficient than would be a pipeline too, as well as safer. And if you consider the huge costs and risks and delays of building a new pipeline you can see that the railway solution begins to make a lot of sense. (It may be more labour-intensive too, which in these days of high unemployment would be a good thing.) 

Furthermore, there also is new research about a new containerization technology in which containers full of bitumen could be loaded directly onto container ships and then collapsed and returned empty for re-use, which could become a new made-in-B.C. industry and not require a messy new terminal in Prince Rupert. 
You're welcome to pass these thoughts along to your associates; I tried to promote the railway solution in the run-up to the B.C. election but alas not one party bought in to it. However I am happy to report that a handful of senior players in B.C. industry groups have expressed interest in the concept and I believe a few may actually be studying the feasibilities for themselves, which studies probably will become more apparent and serious when they realize that the existing pipeline proposal is a dead duck (or it should be and will be unless the Harper Conservatives try to ram it down our throats, which they probably would not dare to try to do, especially with the railway alternative at hand). 
One of the subtexts in these resource development projects is the capitalization and tax treatment of development costs, because for some players especially in regulated utilities there are financial and tax advantages in growing their so-called rate base, which leads to greater returns and sometimes greater rates of return - which is a little akin to the sometimes-dubious appeals of P3s which in part can be provinces trying to take advantage of federal tax writeoffs when the feds won't provide a fair share of revenues for needed infrastructure like hospitals.
As an interviewee on CKNW recently noted, there is no one best model for P3s and some models work better or worse than others in various situations, and that's kind of like energy megaprojects too - to make blanket assumptions can be dangerous and really the details of every project proposal need to be tuned to each unique set of circumstances. And this is another one of those.

Kind regards
Now as I say ... I did receive a number of responses and comments to Monday's post and they had varying degrees of agreement to outright disagreement -- and that was just those from people who are in the BC Conservative Party :D
This whole issue of moving oils sands oil to the coast, seems to be one that will be mired in a storm of debate and controversy, and no matter what way of moving it is chosen, that (in my opinion) is how it will remain.
Personally, and I am no scientist, I think moving oil through a pipeline over ground easily accessible in case of a rupture, would be fair safer and easier to get at than in some of the very narrow canyons where rail lines travel.  And should a number of tankers indeed rupture, then a MAJOR waterway ends up in serious trouble.
Maybe the rail line is safer -- I honestly don't know -- all I know is governments at all levels have slowly allowed a loud a very vocal minority of protesters to take the foreground in any resource development proposed -- and that does not bode well for a resource driven economy such as BC has had in the past ... and will have for many years to come.
We need to be making science based decisions, and ensuring we have the best possible safety measures in place should there be an accident.  Nothing short of not having any development (which is what some of these wack-a-doodle protesters actually want) is 100% safe.  That has always been the way it is. 
That's it for me today.  I'm Alan Forseth in Kamloops with the thoughts of one conservative -- along with those of John Twigg. 
John Twigg is an independent journalist specializing in politics, business and economics. He is a former longtime member of the Victoria Legislative Press Gallery, a former Financial Editor of the Regina Leader-Post, former Press Secretary to B.C. Premier David Barrett and a graduate of the University of B.C. and the Vancouver Sun intern program. He was born and raised in West Vancouver and is descended from pioneer B.C. families.

You can visit the Daily Twigg at

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