Wednesday, April 23, 2014

Oil By Rail Just Got More Expensive

An account of the feds new rail safety improvements can be found here.  From it:

The federal government wants a three-year phase-out or retrofit of older tank cars that are used to transport crude oil by rail, but will not implement a key TSB recommendation that rail companies conduct route planning when transporting dangerous goods.

As well, certain tankers that Raitt said have "no continuous reinforcement of their bottom shells" will be removed within 30 days, by ministerial order. There are 5,000 of these cars in North America, she said, but could not give a figure of how many are used in Canada.

Raitt was speaking at a press conference in Ottawa Wednesday to announce the changes.

There are 65,000 of the more robust Dot-111 cars in North America that must be phased out or retrofitted within three years if used in Canada, Raitt said, adding, "Officials have advised us three years is doable."  She said she couldn't calculate the cost of the retrofits, but told reporters, "industry will be footing the bill."

Some rough cost estimates:

Retrofitting older cars can cost more than $70,000 each, while new tank cars cost well over $100,000.

If industry is indeed footing the bill, and if we assume about 1/10th of the total number of cars are operating in Canada, then we're talking billions in expenses over the next couple of years.  Which is to say that a standard argument for Keystone XL (and other pipelines)--block them and the product will just get to its destination by other means--is not necessarily true. Drive up the cost of hauling Alberta bitumen by rail, and you can probably drive down the total amount that gets out of the tar sands by that route. It becomes less economical, that is,  to get oil to market on trains if you're not allowed to immolate small towns along the route.

1 comment:

Steve Bloom said...

Ultimately, I don't think there's such a thing as a tank car immune to bursting open in a repeat LM scenario. Such scenarios are doubtless rarities but, as with earthquake and nuclear power plant engineering (together and separately), life is full of surprises.