TransCanada looking at Plan B: shipping oil by rail

WASHINGTON — Frustrated by yet another regulatory delay, the company behind the stalled Keystone XL pipeline project is delivering a message in the U.S. capital: it’s getting involved in the rail business.

WASHINGTON — Frustrated by yet another regulatory delay, the company behind the stalled Keystone XL pipeline project is delivering a message in the U.S. capital: it’s getting involved in the rail business.

It might be costlier and dirtier, but until the pipeline gets approved, the company says shipping oil on trains might have to do as a Plan B.

TransCanada Corp. president Russ Girling is in New York and Washington this week, telling policy-makers and news outlets that the company is working out the technical and financial details of what Girling calls a “rail bridge.”

The company already has oil-storage facilities in Hardisty, Alta., and Cushing, Okla., and might also build new storage space in Steele City, Neb., Girling said. From there, it would build relatively inexpensive infrastructure to load and unload the oil from the rail system, then hire train companies to transport it into Keystone XL’s already-completed southern leg.

Girling’s overarching message, however, is this: the company is not giving up.

“TransCanada is not walking away from anything,” he said in an interview with The Canadian Press.

“As long as our customers are there, then TransCanada is going to be there…. We need a bridge between now and when we can build a pipeline… We use the word bridge, and by bridge we mean it just bridges us to the point in time in which you put in the pipeline.”

It’s not the first time the company has mused about greater involvement in rail shipping, which has skyrocketed in Canada and which rival pipeline companies Enbridge Inc. and Kinder Morgan already participate in. But the increased definitiveness of that message, and its timing, serve to illustrate what pipeline supporters have been stressing for some time: this oil is getting to market — if not by Keystone, then by means that won’t be any cleaner or safer. Girling said he was taken aback by a phone call he received on Good Friday, while he was on vacation. S

omeone at the U.S. State Department called to say that an announcement was coming later in the day that, thanks in part to an ongoing Nebraska court dispute, the presidential approval process was being delayed indefinitely.

Meanwhile, Secretary of State John Kerry was making a similar phone call to his Canadian counterpart, Foreign Affairs Minister John Baird. Girling said he asked his caller what had changed since President Barack Obama had told a gathering of state governors that a decision was coming soon — but didn’t quite get an answer.

In any case, Girling’s phone kept ringing throughout that holiday weekend. His customers immediately started urging him to move ahead with the rail idea, he said.

“They’ve come to us and said, ’Can you guys tell us how long this is going to be?’ We said, ’No, we can’t,”’ Girling recalled.

“They asked this question: ’Then can you build rail-loading facilities in Hardisty, Alta., and in a certain location in the U.S. so we can tie into … the Keystone pipeline?’… We’ve got a system that’s three-quarters built. And they want to know if we can build a bridge.”

The company can’t say yet how much of the Keystone slack the new rail facilities would be able to pick up.

But it says it would be sizable — with an early objective being to carry as much as half of the 830,000 barrels per day that Keystone is designed to ship. Girling promised more information soon, as the company works out details with engineers and customers.

“Give us another couple of months and we’ll have better answers. But the up-front capital cost isn’t that expensive,” he said.

One thing is clear: Rail is not an ideal, or permanent, solution. Girling said it would take 1,200 or 1,300 trains per day, passing through towns between Alberta and the midwestern U.S., to carry the same volume as Keystone.

It would also be more expensive — perhaps 50 or 100 per cent more, to ship by rail, he said. On top of that, there’d be an extra partner siphoning off the profits.

“From our perspective, we don’t make a whole bunch of money doing this… Most of the money is spent on rail movement, which goes to the rail companies and things like that,” he said.

“But it’s a service for our customers.”

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