Last year, Canada exported a record amount of tar sands oil to the U.S., despite low oil prices leading to major losses once again for the struggling tar sands industry. That achievement required a big bump in hauling oil by rail, with those daily volumes in late 2018 more than double the previous record in 2014 during the first oil-by-rail boom.
Canada’s oil industry essentially has reached its limit for exporting oil into the U.S. through pipelines. That’s why it’s turning to rail to export more and more oil, but as an ever-increasing number of oil trains hit the tracks of North America, expect more accidents and oil spills to follow.
If Canada can open up new pipeline capacity, this scenario may change. However, Enbridge recently announced its Line 3 pipeline replacement will be delayed until at least the second half of 2020. That means if Canadian tar sands companies want to increase exports, they will have to move that oil by rail. ConocoPhillips chief financial officer Don Wallette, Jr. recently confirmed this reliance on oil trains to the Wall Street Journal: “The intention is to bridge us over to the next major pipeline expansion, so a few years.”
This could result in a near doubling of the current record volumes of Canadian crude moving by rail. Trains potentially could haul over 600,000 barrels per day (bpd) in the next two years, an outcome I predicted four years ago when the Canadian industry was moving only 150,000 bpd of oil by rail.
To put these volumes in perspective, the Enbridge Line 3 pipeline will have a capacity of 760,000 bpd. Oil trains amount to a veritable pipeline on wheels.
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