Safest way to ship crude debated
By Bloomberg News
Published: Saturday, April 20, 2013, 9:00 p.m.
A rejection of the Keystone XL pipeline by President Obama would push more of Canada's $73 billion oil exports onto trains, which register almost three times more spills than pipelines.
The March 29 rupture of an Exxon Mobil Corp. oil pipeline in Mayflower, Ark., provided the latest evidence for opponents citing the risk of environmental contamination in their efforts to scuttle the Keystone XL project, a nearly 2,000-mile pipeline linking Alberta's oil sands with the world's largest refining market on the Gulf Coast.
The alternative, hauling crude by rail, might be worse, said Charles Ebinger, director of the Brookings Institution's energy security initiative.
A denial of Keystone XL this year would “undoubtedly” result in more oil spills by trains, Ebinger said. Trains' higher accident rate mainly is a result of leaking rail car equipment, spill records show.
“The evidence is so overwhelming that railroads are far less safe than pipelines, that it would be a serious mistake to use these recent spills to say that Keystone is unsafe,” he said.
Brookings is a Washington-based nonprofit that says it supports economic and social welfare and a strong American democracy.
The State Department, which has jurisdiction over TransCanada Corp's $5.3 billion pipeline project because it crosses an international border, is expected to make a recommendation to Obama by September.
Shipping more supplies by rail would lead to higher costs for oil producers because train shipments are more expensive than pipelines. Warren Buffett's Burlington Northern Santa Fe LLC is among U.S. and Canadian railroads that stand to benefit should Obama reject the pipeline.
As oil supplies build in the United States and Canada, producers have turned increasingly to rail as they wait for pipelines to carry their crude to market. A debate over the safety of pipelines versus trains has been reignited by the Exxon spill and two railroad spills the same week, said Tony Hatch, an independent rail analyst based in New York.
Two Canadian Pacific Railway Ltd. train car derailments, on March 27 in Minnesota and April 3 in Ontario, spilled an estimated total of 757 barrels of oil.
Without Keystone, designed to carry 830,000 barrels a day of oil, shipments of Canadian crude by rail would rise 42 percent by 2017, according to RBC Capital Markets.
“One of the unintended consequences of delaying Keystone XL is that more oil has been getting to markets in Canada and the United States using rail, truck and water-borne tankers,” said Shawn Howard, a spokesman for TransCanada. “None of those methods of transportation are as safe as moving it by pipelines.”
Railways record spills 2.7 times more often than pipelines, according to the Washington-based Association of American Railroads. The State Department, citing a 2012 study from the free-market Manhattan Institute, says trains spill 33 times more than pipelines.
The railroad association calls that report “seriously flawed.”
Pipeline spills are typically four times larger than rail releases, according to Holly Arthur, a spokeswoman for the railroad industry group. While both Canadian Pacific spills were related to derailments, 95 percent of U.S. spills result from problems with valves or fittings, she said.
Comparing the safety record of railroads and pipelines is difficult, and both deliver more than 99 percent of products without incident. U.S. pipelines carried 474.6 billion gallons of crude and petroleum products in 2012 and reported 2.3 million gallons spilled, according to John Stoody, spokesman for the Association of Oil Pipelines.
During the decade ending with 2012, railroads hauled 11.2 billion gallons of crude with 95,256 gallons spilled, the majority from one 2008 accident in Oklahoma that accounted for 81,103 gallons, according to the rail association.
The pipeline-versus-rail safety debate began heating up when the State Department, in its March 1 environmental assessment of Keystone XL, said a denial of the pipeline would not block oil-sands development. Instead, most of the line's capacity of 830,000 barrels a day would shift onto rail, according to the report.
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