Canadian National: Tanker car delivery could save firms billions

Dave Cooper, May 17, 2009, Canwest News Service--A plan by Canadian National Railway Co. to deliver Alberta's heavy oil in tanker cars rather than pipelines could save oil firms billions of dollars while helping smaller oilsands projects south of Fort McMurray get product to market, the North American rail giant believes.

CN's plan could also make Enbridge Inc.'s $4-billion Gateway pipeline to Kitimat to connect to Asian markets unnecessary.

"We're already there [in Prince Rupert], and establishing a terminal would be the same for rail or pipelines," Randy Meyer, CN's manager of oilsands sales, told the Van Horne Institute's transportation summit in Edmonton this week.

The strategy, called Pipeline on Rail, would hardly make a dent in CN's massive capacity to move freight anywhere in North America. By the end of 2009, CN aims to be shipping 10,000 barrels a day from producers not attached to a pipeline, executive vice-president Jim Foote recently said.

CN's current volume of coal shipments from the six mines it serves is equivalent to transporting 210,000 barrels of oil a day, and represents just five per cent of the railway's business. CN moves 130 trains a day in Western Canada alone, and adding just 400,000 barrels a day of bitumen, or heavy oil -- the capacity of the Gateway pipeline -- would be equivalent to between four and six new trains a day.

Unlike building pipelines with 30-year contracts, oil producers face a lower risk by choosing rail, said Meyer.

"Putting terminals on a rail system is like adding peripherals to your computer -- you don't need a whole new system. And there is a commodity risk for producers who must supply the diluent," the solvent that allows the bitumen to flow and is later recovered, he said.

Because rail is "scalable," smaller facilities would pay only for the freight service they need.

Enbridge Inc., described by Bloomberg as the biggest transporter of oil to the U.S. from Alberta's oilsands, disagrees.

"We applaud CN's efforts," said spokesman Glenn Herchak, who added that rail can work in the short term for some customers.

"But we can mix crude and offer storage facilities. Pipelines are the most efficient system long-term, and we have been doing this for 60 years," he said.
© The Vancouver Province 2009