Thursday, March 13, 2014

Moving Bitumen by Rail Rather than Pipe will Lessen Tar Sands Expansion

While moving fossil fuels by rail is inherently dangerous, it is a better option than the proposed Keystone XL pipeline. In the absence of the Keystone XL, some of that tar sands oil will be shipped by rail, but this transportation option will limit the amount of bitumen that can be moved. It will certainly be far less than the 830,000 barrels per day that could be ferried by the KXL pipeline.

The reasons for this are twofold. First rail is a more expensive option (approximately $8 more per barrel). Increasing costs will put downward pressure on the volumes of oil that will be transported.

Second, existing and additional safety regulations surrounding rail transport further impedes shipping oil by this means.

The combination of lower transportation costs and a more stringent regulatory environment for rail transportation compared to a pipeline will decrease tar sands production.

Oil companies will have incentives to ramp-up tar sands production if they have access to the Keystone XL pipeline. They will have less incentive to expand production if they have smaller markets and diminished capacity to transport large volumes of bitumen.

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