By JIM SNYDER
Environmentalists opposed to the Keystone XL pipeline are
expanding their fight against imports of Canadian heavy crude
oil by trying to block rail projects that offer another way
for it to enter the US.
Debating rail or pipelines is like debating which kind
of poison you want, Daniel Kessler, a spokesman for
, an environment
al group, said in an
interview. There is a substantive effort under way in
many places to block rail.
Environmental groups including 350.org
Keystone because they say it would promote development of oil
sands, a type of crude that releases more greenhouse gases in
its production and refining
than other forms of oil.
Canada, the biggest foreign supplier of oil to the US, has
lobbied hard for the pipeline to promote growth of its energy
The use of trains to carry crude is increasing in both the US
and Canada as production outstrips the capacity of pipelines
to transport the bounty. In Canada, producers are rushing to
secure rail cars while US President Barack Obama reviews
Keystone, a $5.4 billion pipeline that TransCanada wants to
build to link the oil sands in Alberta with refineries on the
US Gulf of Mexico.
Shipping the Alberta oil by rail benefits lines including
Canadian National Railway Company, the Canadian Pacific
Railway Ltd. and Burlington Northern Santa Fe Corp., a unit
of Warren Buffetts Berkshire Hathaway.
Opponents of oil sands are targeting rail terminal projects
in California, Washington state and elsewhere and pushing
federal regulators to mandate expensive retrofits to tanker
cars that could impede efforts by producers to expand their
fleets. The campaign represents a threat to Canadian oil,
which together with natural gas is Canadas largest
export to the US.
Oil sands critics are already having some success. The
Shorelines Hearings Board, which oversees construction
states coast, last week blocked permits for two crude
terminal projects at Grays Harbor and called for additional
study of the environmental risks of increasing ship and train
Kristen Boyles, a spokeswoman for Earthjustice, said
one concern voiced by critics was that the terminals would
receive oil sands products, which can be harder to clean up
in a spill than conventional crude.
Valero Energy's plan to build a terminal at its Benicia,
to off-load crude has
been delayed as city officials seek an environment
While the company isnt saying what type, groups
including 350.org and the Natural Resources Defense
Council say it will probably include some fuel from the oil
Bill Day, a spokesman for San Antonio-based Valero, said the
project would make the refinery
more competitive by
giving it access to cheaper fuel. Its two California
refineries lost $78 million in the last quarter, the weakest
performers among the companys 13 plants in the US, he
Day said the project
emissions, as some critics have claimed. By displacing the
need to ship oil into the refinery
, the plan may improve
area air quality, he said.
The campaign against the plan is misguided, Day
In Washington state, the San Francisco-based Sierra Club is
urging Governor Jay Inslee to block a joint proposal from
Tesoro Corp., a San Antonio-based refiner, and Savage
Companies, a Salt Lake City-based logistics company, to build
a rail terminal in Vancouver, Washington.
That proposed facility is expected to mostly unload light
sweet crude from North Dakota, though it also may handle some
tar sands fuel, said Kate Colarulli, deputy director of the
Sierra Clubs Beyond Oil campaign.
Kelly Flint, Savages general counsel, said the company
was confident it would convince regulators the facility
can be built safely and in an environmentally
A draft environmental review released by the US State
Department in March found that Keystone wouldnt impact
climate change in part because trains would pick up the slack
if the pipeline wasnt built. Environmental groups have
spent the months since trying to discredit that finding. Rail
lines, they argue, are a complement, not a replacement, to
Keystone could carry 830,000 bpd of oil to US refiners. By
comparison, an average of 175,000 bpd of oil were imported by
rail this year, about 75,000 bbl of it heavy oil, according
to the Canadian Association of Petroleum Producers. About
45,000 bbl of oil was shipped to the US daily on average in
2012, according to the group.
Rail proposals in western Canada could load as much as
450,000 bpd of heavy oil by the end of 2014. An insufficient
number of tank cars could create a bottleneck through at
least next year, Goldman Sachs Group Inc. said in a report in
While oil sands growth could be temporarily deferred in
the event that Keystone XL is not approved, rail could
significantly mitigate the impact of a negative
Keystone XL decision, according to a September report
from the Royal Bank of Canada.
Philip Verleger, an energy economist based in Colorado, said
al groups will have a
harder time blocking rail projects because many are expansion
s of existing facilities
or would be built in
industrial sites and face fewer regulatory hurdles.
Projects on the West Coast will probably take more light
sweet crude than Alberta bitumen, while facilities
planned in North Dakota
and Louisiana, two oil states, probably will have broad
community support, he said.
They will try to slow it down, Verleger, once an
energy adviser to former President Jimmy Carter and founder
of the consulting firm PK Verleger LLC, said in an interview.
But I would be surprised if they could stop the construction
of a well-thought out
More than 2.9 million bpd of oil entered the US from Canada
by all methods last year, according to the Energy Information
Even as they argue the State Department analysis exaggerated
rail capacity, 350.org
, the Sierra Club, Natural
Resources Defense Council and other groups are stepping up
opposition to rail project
s that could also promote
oil sands development, if on a smaller scale than Keystone.
The strategy behind stopping these tar sands and other
dangerous forms of oil is to strand the asset,
Colarulli said in an interview.
Pipelines, ports and rail terminals are all necessary
parts of the network to move tar sands globally, she
Oil sands production will increase from 1.8 million bbl in
2012 to 2.3 million bbl in 2015 and 4.5 million in 2025,
according to the Canadian producer group, whose members
include a unit of ExxonMobil.
Groups are also taking the fight to Washington where the
Department of Transportation is reviewing new safety rules
for train cars that carry flammable liquids like crude oil.
The derailment and explosion of a crude-filled train in Lac
Megantic, Quebec, that killed 47 people last July brought
greater awareness of the risks. They were further underscored
earlier this month when a train carrying oil crashed in
Alabama, sparking a fire that burned for days.
The Pipeline and Hazardous Materials Safety Administration,
part of the Transportation Department, is reviewing whether
to require cars that carry oil and ethanol
to be upgraded to better
Requiring the retrofitting of thousands of older cars means
manufacturers probably wont have the capacity to build
new cars to carry heavy crude from Alberta, said Anthony
Swift, an attorney at the Natural Resources Defense Council.
The cost of leasing remaining tank cars will increase
-- increasing the costs of moving crude by rail, Swift
said in an e-mail. This is particularly problematic for
tar sands producers, as they dont have the margins to
support even minor costs increases.