The Alternative To Keystone XL Pipeline: Ship The Oil By Rail

Altex Energy/Promo image

Like any good TreeHugger I am against the Keystone XL pipeline, really I am; but as I wrote in Is the Keystone XL Pipeline Protest About Tar Sands or Politics?, the problem isn't on the supply side, it is the demand. As Mat noted in Limited Export Capacity Behind Big Push For Keystone XL Tar Sands Pipeline, without the pipe there are not a lot of places for the oil to go, so there is a glut of the stuff in the upper midwest where the pipe now ends, and the price is about $30 dollars a barrel less than the going international price.

So what are the oil companies doing? They are moving it by rail. This costs three times as much as the $3 to $6 per barrel that it costs to move it in a pipe, but when there is such a big spread the economics work. According to Nathan Vanderclippe in the Globe and Mail:

Pipelines have long been favoured by energy companies because they are generally cheaper and safer. The argument for trains comes down to simple math. Moving a barrel by rail can cost $15, compared with $3 to $6 by pipe, depending on destination. But that price difference pales next to a $20 to $30 premium for reaching the right destinations. That creates an advantage for rail carriers, which can adapt to changing markets in days, compared with the years – if not decades – it takes to build new pipe.

Also, the rails go just about everywhere:

Oil is now “going to every market where rail goes,” said Glen Perry, president of Altex Energy Inc., which is working to boost oil shipments by train. “California, Texas, Louisiana. I’m not involved in all the trades, but there’s probably some going to the East Coast, too.”

Shipping by rail is more dangerous than by pipeline, more polluting, more expensive, and growing like mad. And as long as the demand is there and the price differential is big enough, the energy companies are going to keep doing it. It is why trying to limit supply of dirty oil by killing the Keystone will never work; we have to kill demand by producing better vehicles and viable alternatives to driving.

Tags: Alberta | Tar Sands | Tar Sands Action