Integrating Railways: An Export Strategy for Alberta Crude Oil
Date
2013-10
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Abstract
Canada’s economy has long been resource based, but the current challenges faced
by western Canada’s oil producers are unprecedented and pose a threat to continued
prosperity. With the main export pipelines operating at or close to capacity and further
increases in crude oil production on the way, expanded access to markets is required to
avoid deep discounting of the prices received for Alberta’s crude oil production or even
the possibility of shut in production. To address this issue, a number of proposals for
new export pipeline capacity have been advanced. However, these have and are facing
considerable opposition. The political and regulatory challenges ahead of these pipeline
projects are varied, spanning concerns over potential environmental damage to
Aboriginal land rights.
Faced with actual and expected pipeline capacity constraints, the upstream oil
industry has turned to a relatively new option—railway transit. The objective in this
paper is to evaluate the potential of this option over the longer term in Canada’s oil
market access and diversification goals, along with key policy issues that would need to
be addressed for crude-by-rail to play an important role. The crude-by-rail expansion has taken Canadian railways by storm and appears to
be a viable option in an environment of limited export pipeline capacity. Due to
advantages in market reach, existing infrastructure, and a comparative advantage in
heavy crude transit, railways are uniquely positioned to aid in Canada’s crude oil market
diversification and export strategy. As American demand for oil imports begins to wane, it will become increasingly important for oil producers to access the rapidly growing
Asian-Pacific markets. Canadian rail can provide the missing link to west coast tidewater
access for crude oil exports, but not without overcoming barriers of its own. Chiefly,
significant investment is needed to equip west coast port termini with rail-to-vessel
unloading and the prospect of increased oil tanker traffic in coastal waters will
undoubtedly face opposition. Additionally, a revitalization of railway operation
regulation is needed to address risks to health, safety, and environmental damage.
Nonetheless, with these initiatives undertaken, railways can be a significant component
of the solution to achieving the market access and diversification required to allow the
crude oil sector to remain a key driver for national and Western Canadian prosperity.
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Citation
Yard, Bohdan. (2013). Integrating Railways: An Export Strategy for Alberta Crude Oil ( Master's thesis, University of Calgary, Calgary, Canada). Retrieved from https://prism.ucalgary.ca.