Oil Via Rail The Significance of Rail The importance of this mode of transport will be seen Saskatchewan and Canada for years to come By Paul Kralovic Production from the oil sands comprises of an increasing share of Western Canada’s crude oil production.1 CERI’s Reference Case Scenario suggests production is projected to increase to 3.4 MMBPD by 2020 and 4.8 MMBPD in 2048; this is up from 2.1 MMBPD in 2013.2 Meanwhile production in the Bakken formation, straddling Saskatchewan and North Dakota, has experience rapid growth and is also slated to increase. Western Canadian resources, however, are restricted by a shortage of pipeline capacity. Enbridge’s Northern Gateway, TransCanada Pipeline’s (TCPL) Keystone XL, and Kinder Morgan’s TransMountain’s (TMX) expansion are all experiencing delays in either the regulatory process and/or strong opposition. With a shortage of pipeline capacity looming, uncertainties over key pipeline projects are inspiring other solutions to deliver Canada’s crude oil to the United States (U.S.) East Coast, U.S. Gulf Coast, or to other lucrative markets. One such proposal is transporting crude oil by rail. Though the concept is not new, it is an idea that is rapidly gaining steam. However, while rail is emerging as an important factor in transporting crude to coastal markets in the U.S. and Canada, it is useful to examine the current snapshot of what commodities are being transported in Canada, to illustrate the diversity and importance of rail to transport a plethora of products across Canada and North America. Railways truly connect Saskatchewan and their valuable resources to lucrative consuming markets all over Canada, North America, and the world. And this is true for every province in the nation. The objective of CERI’s latest study, Commodities by Rail, is two-fold: to examine the movement of commodities across Canada’s rail network, by province and region, providing a snapshot 58 Saskatchewan Oil Report 2015
of what commodities are on the rail network and the direction of rail movement in 2012, and what rail traffic might look like in the 2015, 2018, 2021, and 2024. This article highlights various trends in Western Canada and Saskatchewan. Rail movements of commodities in Western Canada While the analysis in the report is on a disaggregated (63 commodities) and aggregated commodity groups (11 commodity groups), only the latter is discussed in this article. The following reviews the top aggregated commodities in number of railcars in Western Canada, as well as identify Western Canada’s top exports to Eastern Canada. Rail traffic is split into three types: shipments to and from the other region, and intra-provincial rail traffic for all provinces within that region. Figure 1.1 illustrates the total rail traffic in the western provinces by aggregate commodities, in terms of number of railcars in 2012. The top five commodity groups in Western Canada are mixed loads or unidentified Freight (1,196,476 railcars), coal (462,673 railcars), food products (376,324 railcars), lumber and wood products (284,592 railcars) and metals and minerals (221,966 railcars). It is important to note that wheat and petroleum products account for 207,649 rails cars and 204,581 railcars, respectively; this is approximately six per cent and 5.9 per cent of total rail traffic in Western Canada. On the other hand, mixed loads or unidentified freight comprises of 34.8 per cent of all traffic in Western Canada. Included in mixed loads or unidentified freight is intermodal freight, or railcars used to carry trailers and containers often utilized for different modes of transportation.