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The disaster in Lac-Mégantic, Que., has not deterred plans to build oil rail terminals. About about 150,000 barrels of oil currently roll on Canadian rails each day. (Les Perreaux/The Globe and Mail)
The disaster in Lac-Mégantic, Que., has not deterred plans to build oil rail terminals. About about 150,000 barrels of oil currently roll on Canadian rails each day. (Les Perreaux/The Globe and Mail)

Saskatchewan oil rail terminal planned Add to ...

The deadly oil-by-rail disaster in Quebec has done little to quell plans to move more crude on trains in Canada, with the third announcement of a new loading terminal unveiled in as many weeks.

Proposals to ratchet up capacity to move oil to market on rails – the latest being a $100-million terminal planned for Saskatchewan – are coming as major pipeline projects, including TransCanada Corp.’s Keystone XL conduit to Texas refineries from Alberta, stagnate in regulatory limbo.

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Tight export pipeline capacity was cited as the main reason why Canadian heavy crude was hit with deep discounts, or price differentials, compared with U.S. and international oil until early this year.

Traders have said the rapid expansion of oil shipments by train has been a big factor in easing the constraints and tightening that price spread since then.

“Two things happened at the same time – Bakken expansion and XL postponement. I mean, it was supposed to come on in 2012,” FirstEnergy Capital Corp. analyst Steven Paget said.

The $5.3-billion (U.S.) Keystone XL project, which has become a divisive environmental issue in Washington, D.C., is designed to move both Canadian oil sands crude and light oil from North Dakota’s booming Bakken region.

“It got delayed – delay after delay – and differentials caused shippers to realize that being exposed to that is a lot worse than committing to a couple of extra rail terminals,” Mr. Paget said.

Rail facilities with a total capacity of 708,000 barrels a day, about a quarter of Canada’s current overall oil output, have been planned to start between 2012 and 2015, according to ARC Financial Corp.

Mr. Paget estimated about 150,000 barrels currently roll on Canadian rails each day.

The July 6 derailment and explosion of an unmanned oil train in Lac-Mégantic, Que., which killed 47 people and destroyed a large part of the town, has already prompted new regulations to improve safety when handling petroleum. Some analysts have said they expect new rules and costs that could put a cap on the practice.

Still, new projects keep coming, although Mr. Paget noted that many of them have been in the planning stages since well before the tragedy.

Calgary-based Torq Transloading Inc. said Wednesday it aims to build a terminal near Kerrobert, in western Saskatchewan, that could load two 120-car trains with heavy crude oil each day, and also store 500,000 barrels in tanks.

The loading capacity would equate to up to 168,000 barrels a day that could be pumped into “unit trains,” or those that solely move crude. It would be served by Canadian Pacific Railway Ltd., said Torq, a privately held company that currently operates six terminals for loading trains with crude.

Word of its project comes after last week’s announcement by Gibson Energy Inc. and U.S. Development Group LLC of a 140,000-barrel-a-day rail terminal in Hardisty, Alta. A week earlier, Keyera Corp. and Kinder Morgan Energy Partners LP announced a 40,000-barrel-a-day terminal in Edmonton.

Torq is securing necessary shipping contracts to backstop the project financially, chief executive Jarrett Zielinski said in an interview. The company plans to start operations in the third quarter of 2014.

The Saskatchewan location allows for a $5-per-barrel saving on shipping costs to regions such as the U.S. Gulf Coast and East Coast, compared with moving oil from Fort McMurray, Alta., area, Mr. Zielinski said.

The Quebec disaster forced Torq, one of the early developers of oil by rail in Western Canada, to “pause and review risk,” he said. “We have certainly been pioneers in the safety component of [oil by rail], and work with regulatory bodies to overcome some of the current safety issues,” he said. “However, the product needs to get to market and we feel we can help facilitate that in a safe way.”

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