Russ Girling is prepared to accept that he is, for now, losing.
Pipelines built by companies such as Mr. Girling’s TransCanada Corp. carry the vast majority of the crude oil shipped around North America. This year, however, nearly 10 per cent of the volume of oil pulled from the ground in the U.S. will not flow through that massive network of buried steel. It will instead be loaded on to trains and race across the continent in a blur of tanker cars that is transforming the way North America’s energy moves.
It is a giddy procession of profit, as trains connect western oil wells to coastal and global markets willing to pay far more for crude than the inland buyers attached to the continent’s pipeline system.
It’s also a procession of risk. Though accidents remain infrequent, trains leak hazardous materials more frequently than pipelines, have a higher accidental death rate and produce greater emissions.
But they are succeeding where pipelines are stumbling.
Across North America, planned pipelines are running into an outpouring of public discontent largely around environmental concerns, allowing locomotives to increasingly step in as an alternative.
In 2008, fewer than 20,000 barrels a day of crude oil moved on trains in the U.S. By the end of 2012, that number had jumped above 500,000 – a more than 25-fold increase in five years.
Meanwhile, projects such as TransCanada’s Keystone XL pipeline, which would carry 830,000 barrels a day to the U.S. Gulf Coast, languish even as existing pipelines out of Canada are stuffed to capacity.
“Short term, the critics are slowing pipeline development. There’s no question,” Mr. Girling said in a recent interview.
But as he contemplates all of those trains moving barrels that could be flowing in TransCanada steel, he is struck by a rich irony. If pipelines are being stopped on environmental grounds, the result has in some ways been the exact opposite.
“By denial of the pipeline, safety risk increases. Potential environmental risk increases. Greenhouse gases increase,” Mr. Girling says. He adds: “So I’d call it a Pyrrhic victory, where they’ve slowed down, potentially, the development of the Canadian oil sands for a short period of time – until alternatives are found. But in the short run, they haven’t achieved any of these safety or environmental objectives.”
Trains have long been bearers of coal, wheat, lumber and a host of consumer goods. They are, for many commodities, blessed with numerous advantages. They move with relative speed. They are far more economical than trucks. They travel across routes created decades and centuries ago, along rights-of-way imbued with all manner of legal rights, a lengthy history that gives them the power to be particularly agile.
Want to build a pipeline? Strap yourself in for a costly, years-long struggle with landowners and governments. Want to move oil on a train? Get a tanker car and load it.
That is exactly what a growing number of oil companies have done. In the U.S., the spectacular ascent of new oil plays in places like North Dakota has far outstripped the ability of pipelines to accommodate new oil volumes. The American Association of Railroads recently distilled the “pipeline on rails” euphoria into a single headline: “Railroads emerge as permanent solution for crude oil shipments.”
In Canada, where the pipes to the U.S. are now effectively full, trains have become an increasingly important way around the logjam. Refineries desperate to get crude on the cheap have also turned to rail, which can carry North American oil that sells for far less than international barrels.
But underlying the euphoria is a set of unpleasant statistics. Trains may deliver big new profits to oil companies and refineries alike. They also deliver the potential for problems. The industry itself acknowledges that trains have nearly three times the number of spills as pipelines. The U.S. State Department found that, when moving liquids, trains have a death rate three times higher than pipelines and a fire or explosion rate nine times higher. The U.S. Pipeline and Hazardous Materials Safety Administration says that over all, pipelines beat other modes of transportation on all facets of their safety record.
“If you’re against pipelines, then you have to think about what the alternatives are – and are they better than pipelines,” says Terry Lake, the British Columbia Minister of Environment. He is part of a government that has harshly questioned the Enbridge Inc. Northern Gateway project, and laid out a set of strict criteria that have become an obstacle to constructing new pipelines.
Now that oil has begun to move through British Columbia on trains, however, the B.C. government has had to consider the potential unintended consequences of blocking pipelines. In a recent paper that presages changes to the province’s land-based spill response, it lists railways alongside pipelines as a potential environmental risk.