Who needs a pipeline when you have a railroad?
Until June’s deadly derailment of a crude-oil train in Quebec, pipelines dominated the debate about moving oil. But rail shipments of North American crude oil already have matched what the controversial Keystone XL pipeline was proposed to carry, and more is on the way.
What started as a stopgap has become the go-to for transporting crude to refineries and storage centers.
“A big part of the popularity of rail is that the president can’t veto it,” said Eric Smith, associate director of the Tulane University Energy Institute.
That popularity is being felt in the Kansas City area, one of the busiest railroad hubs in the country. It’s also the base and railhead for Kansas City Southern, which is transporting oil to major refineries on the Gulf Coast.
The railroad’s oil shipments in the first half of the year were 7,600 carloads or about three times the amount for the same period in 2012.
The company is carrying Canadian and North Dakota oil that is first delivered to Kansas City by Canadian Pacific Railway, Burlington Northern Sante Fe and Union Pacific.
From there, Kansas City Southern takes over, shipping the commodity to refineries in Port Arthur, Texas, and elsewhere on the Gulf Coast, said C. Doniele Carlson, a spokesperson for Kansas City Southern.
Other railroads are moving oil to the West and East coasts.
Indeed, the amount of crude oil traveling by rail in the United States has soared 25 fold since 2008, from 9,500 carloads in 2008 to 234,000 carloads in 2012, according to the Association of American Railroads. For the first three months of this year, oil shipments by rail are up 166 percent compared to the same period in 2012.Tragedy spurs safety concerns
The growth in oil shipments has sparked safety concerns, especially in the wake of the Quebec derailment.
On July 6, at least 47 people were killed in Lac-Megantic, Quebec when an unmanned crude oil train rolled down a hill into the center of town. Although the cause of the derailment and subsequent explosions that leveled most of the city’s downtown won’t be known until Canadian authorities finish their investigation, the fiery wreck left many wondering if there was something inherently unsafe about transporting crude by rail.
The Association of American Railroads said only a fraction of oil is spilled when transported by rail compared to pipelines. Kansas City Southern said it has not had “any significant crude oil spillage incidents.” The railroad did not elaborate.
But federal regulators recently have tightened safety regulations. On Thursday, the Federal Railroad Administration announced plans to start asking railway companies for testing data saying it was concerned about safety of some tank cars used to carry oil.
Some Keystone XL supporters pointed to the Quebec accident as evidence that pipelines are safer, although pipeline spills tend to be larger than rail spills, according to the Pipeline and Hazardous Materials Safety Administration.
Anthony Swift, an attorney on energy issues at the environmental group Natural Resources Defense Council, said both rail and pipelines have safety problems, and that regulators need to address both to catch up with the ever-increasing volume.
“A tragic disaster moving crude by rail,” he said, “doesn’t make pipelines any safer.”Trains versus pipelines
The boom in rail shipments has also shifted the debate about how oil should be moved around the country. Environmental and community groups may find that they have less power to stop a train than to stall a pipeline.
Pipelines can take years to approve and can only move a product from point A to point B. Rail cars, by contrast, can be deployed quickly and can go almost anywhere. Oil producers and refiners turned to rail because they didn’t have enough pipelines. They discovered they liked it.
“They always thought of pipelines,” said Philip Verleger, an energy economist and a visiting fellow at the Peterson Institute for International Economics, a Washington think tank. “Once they demonstrated it can be done (by rail), they said, `Oh, why didn’t we think of it?'“
In March, 71 percent of North Dakota crude moved by rail, versus 20 percent by pipeline, according to state data. The rail shipments, and new hydraulic fracturing technology, have helped North Dakota overtake Alaska as the nation’s No. 2 oil producer. Texas is No. 1.
The jump in crude oil production from North Dakota where there is not enough pipeline capacity to move supplies, accounts for a large share of the increased deliveries of oil by rail. North Dakota is the second largest oil producing state after Texas, according to the Energy Information Administration.
Keystone was intended to transport both light crude from the hydraulic fracturing, or fracking, of shale formations in the Bakken region in North Dakota, as well as heavy crude extracted from the tar sands in western Canada.
Environmentalists oppose Keystone because it would tap the western Canada tar sands, which are more carbon intensive and involve carving up boreal forests in a manner that resembles the surface mining of coal.
While Obama still must decide whether to approve the Keystone XL project, the oil can flow by rail without his signature. In addition to Bakken oil, a small but growing volume of Canadian tar sands crude is moving by rail.
Unlike a pipeline, rail can reach virtually everywhere, and not just refineries. The port commission in Vancouver, Wash., recently approved a terminal that could receive as many as four trains a day. Tanker ships would take the oil to refineries in the Pacific Northwest. Yorktown, Va., is set to open a terminal later this year that would receive two trains a day. The oil would be shipped to refineries in the mid-Atlantic via tanker ship or pipeline.
In June, Kinder Morgan canceled plans for an oil pipeline from Texas to California. The refiners were satisfied with receiving crude by rail.
It’s more expensive to ship crude by rail than by pipeline, but Verleger said the flexibility is worth the cost.
Railroads have the spare capacity to move the oil, and they can make more money doing it.
“Oil has given a whole new breath of life to railroads,” said Robin Wehbe, who leads the energy research team at the Boston Co., a consulting firm. “Economically it’s bringing life to a lot of areas that didn’t have any.”
The Star’s Steve Everly contributed to this story.