TransCanada about to enter the rail business as Keystone XL delay drags on

Facing increased pressure from rail cutting into its business, while the Keystone XL pipeline remains under unending American review, TransCanada Corp. said it is planning to diversify into the oil-by-rail business within months, improving its customers’ ability to connect to its sprawling North American pipeline and storage network.

“We are approaching 1.2 million barrels per day of [rail-] loading capacity — nobody has waited for Keystone XL pipeline to get built,” Russ Girling, president and CEO of the Calgary-based pipeline operator, said Wednesday following a speech to a business audience in Toronto.

“Depending on our conversations [with customers], we will probably enter the rail business in some form or fashion in the coming months,” Mr. Girling said, noting he expects shippers to move to the pipeline once its gets built, as it offers lower costs.

TransCanada has storage space in Heartland and Hardisty, Alta., near Edmonton, Cushing, Okla. and in Texas, Mr. Girling said, and shippers were keen to connect to those facilities. “There are certain places they want to go where they would like to hook up to facilities that we can build as loading facilities in Alberta, and to get to certain places in North America where we are already positioned,” he said. “So if we can build loading and offloading facilities for them — and we are having conversations with them as we speak.”

TransCanada has hinted at a rail link to connect its customers to the U.S. market in the past, but talks with customers appear to have advanced as the company has faced six years of delays in waiting for Washington to approve its 830,000-bpd Keystone XL pipeline proposal. President Barack Obama has been warned off approving the pipeline by environmentalist activist donors, who insist that it should be scrapped, since it would encourage production of carbon-intensive oil sands.

Pipelines are widely considered to be safer and more environmentally friendly forms of oil transport, compared to rail. TransCanada has stated that oil by rail emits three times the greenhouse gases of pipelines, although rail companies dispute the figure.

Mr. Girling said the company does not expect to be “a big player” in the rail business, but forecasts the industry’s capacity to rise to two million bpd, “as we wait for pipeline approvals.”

TransCanada’s move to include rail in its arsenal has become necessary as rail companies Canadian National Railway Co. and Canadian Pacific Railway Ltd. enjoy a windfall from the oil transportation business. TransCanada’s competitors, including Kinder Morgan Inc. and Enbridge Energy Inc., are also building rail capacity to get around pipeline infrastructure constraints.

More crucially, the midstream company is frustrated at not being able to offer solutions to its shippers as Keystone’s review process drags on. On Tuesday, the U.S. Environmental Protection Agency advised the U.S. State Department, which is continuing to review the project, to “revisit” some of its previous conclusions about the pipeline. The EPA questioned the State Department’s assessment of Canadian oilsands emissions, its assumptions about the price of oil and asked it to “look harder” for alternative routes for the pipeline.

Mr. Girling said the EPA letter is a delaying tactic, noting that the company had looked at dozens of alternative routes that have been “studied and studied and studied.”

“At US$50 a barrel, the oilsands are still going to get developed anyway … I don’t think anything the EPA said the other day changes any of those facts. We don’t need to another market study to tell us that.”

The State Department has been reviewing the northern leg of the Alberta-to-Texas pipeline for six years, but the project appears to have cleared most of the procedural hurdles.

The department is expected to makes its final recommendations to President Obama after having recently received comments from eight key government agencies.

Last week, the Republican-controlled U.S. Senate passed a bill to approve the Keystone XL pipeline, setting up a showdown with the president, who has threatened a veto.

“If [the bill] is vetoed I believe we are exactly where we were before, which is with the State Department process,” Mr. Girling said.

“That doesn’t mean that the political agitation on this project is going to go away, by any means. This is an issue that many people have a great interest in and will continue to be agitated by. But the State Department process is the process we’ve been participating in for the last six years, and have met every threshold and hurdle that they’ve set out.”

As Keystone XL suffers delays, TransCanada has applied for a permit to build a $12-billion Energy East pipeline to connect Western Canada to tidewater to the east. But criticism of that project has been rising, too, as anti-oilsands activists rally opposition to another pipeline, and Ontario and Quebec governments expressing a possible unwillingness to co-operate with the project.

Ontario Energy Minister Bob Chiarelli said Monday that the province had “significant concerns” about the impact of the project on First Nations, the environment and the price of natural gas.

“He is just highlighting his concerns and if I were in his shoes those would be my concerns too,” Mr Girling, noting that the company was had just begun the consultation process. “We have a lot of work to do.”

Thanks, as always.

I was under the impression that crude has been actively moving by rail out of Alberta... mostly to the west coast for shipment to China. I am not completely familiar with western Canada traffic, however.

Still, there would not be any extraction going on if the commodity could not get to market... and I highly doubt they are sending bitumen out of Alberta one tractor-trailer tankload at a time.

mostly to the west coast for shipment to China.

False.

We are using it in the US via other pipelines as well as rail.

Two important items in the article that warrant highlighting:

On Tuesday, the U.S. Environmental Protection Agency advised the U.S. State Department, which is continuing to review the project, to “revisit” some of its previous conclusions about the pipeline. The EPA questioned the State Department’s assessment of Canadian oilsands emissions, its assumptions about the price of oil and asked it to “look harder” for alternative routes for the pipeline. Mr. Girling said the EPA letter is a delaying tactic, noting that the company had looked at dozens of alternative routes that have been “studied and studied and studied.”

The anti-fossil energy opponents in the Obama administration continue to do everything possible to delay this, not based on science but to mollify their left-wind radical environmental base.

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