It would be hard to fault anyone for trying to connect the dots that are Alberta’s oil sands and the Asian market for energy with a line of train cars, especially now that CN is announcing plans to add five extended sidings to its British Columbia North Line this year.
It is one element of the rail company’s ongoing efforts to increase freight capacity through the corridor between Edmonton, Alberta and Prince Rupert, British Columbia that could double traffic along that route over 2011 levels by 2015.
“CN’s sizable investments in rail infrastructure in northern B.C. and western Alberta are helping us accommodate growing import-export traffic moving between the Port of Prince Rupert, the B.C. interior and major centres across CN’s network in Canada and the United States,” said Keith Creel, executive vice president and chief operating officer at CN.
“Our infrastructure investments are critical parts of our B.C. North Gateway strategy to handle increased volumes of containers, coal and other commodities to and from the Port of Prince Rupert,” he added. “This strategy aims to help CN tap new opportunities efficiently and productively while helping our customers to expand their businesses and compete more effectively in their end markets.”
Although CN denied any intention of transporting oil sands bitumen along that line, the growing freight capacity, not to mention the similarity between that route and the proposed route of the beleaguered Enbridge Northern Gateway Pipeline, has Bill Gwozd, vice president of gas services with energy sector consulting firm Ziff Energy, excited about the possibilities.
“When you talk about expansions,” said Gwozd, “producers expand by drilling more wells, plant operators expand by building more plants, storage operators expand by adding compression. Railroads expand by adding incremental small spurs – loops – on their major railways lines.”
That has been CN’s plan for the British Columbia North Line since they began expanding or constructing sidings in 2004.
“You don’t have to twin the whole thing to expand it,” Gwozd explained. “All you got to do is add ten miles of new rail in the middle of nowhere so when a train’s coming at you, you can just pull over and park it. Add two or three of these places to pull over and park, you can send trains both directions almost every hour.”
Gwozd admitted that rail transport comes at a greater cost, but it is a viable option when traditional transmission infrastructure does not exist.
“They’re actually making something happen,” Gwozd said of CN, suggesting that isn’t the case with the pipeline companies and provincial governments.
“These rail guys [are] out there on the limb, jumping the gun, just doing things properly to find a way to make something happen,” he continued. “There’s an opportunity there. And, you know, when you get an opportunity, many times you grind out cost. By practicing, figuring it out, doing it right, you can find ways to reduce your cost.
“These rail guys are ahead of the game. They’re the A Team. And the pipeliners and the provincial governments are still sleeping at the switch, trying to figure out how to get their pipes built through the regulatory process while intervenors in Brazil complain about the trees in Brazil dying, and then try to link that back to oil matters in Alberta and British Columbia.”
Gwozd suggested that oil companies shouldn’t be too concerned about the additional cost of rail transport, but should only really be concerned about moving the oil to market.
“Oil prices can change five or ten dollars a barrel within a week,” he said. “If you can get your oil to certain places and park it, and then market it, you can probably play the game just as effectively, even though you have a little higher transportation cost.”
Earning less money for a barrel of oil not transported by pipeline, said Gwozd, is better than not selling that barrel of oil at all.
“I think this is where people that wonder why it’s taking so long or watching what’s happening are going to miss the boat against these up and comer rail companies that are simply making things happen because there’s an opportunity,” he continued. “They’re aggressive. They want the business. They want to earn that money. And they’re doing it.”
Also, there is the opportunity to ship additional volumes of oil if problems such as corrosion cause a pipeline to be shutdown for any length of time.
“The rail system is sitting there already in place, the tank car systems are already built [and] they can pick up the slack,” said Gwozd.
“Here’s a chance for pipeliners and governments to allow other competitors into the game because of the opportunity that arose,” he added.
“I think it’s very astute of the rail guys to do that.”