Pipeline vs. Rail: Debating the Transportation of Crude

The transportation of crude oil from Alberta’s oil sands to other parts of the country, in addition to the United States and overseas markets, is an issue of contention for many Canadians. Due to Alberta’s geographical constraints, its oil and gas industry faces issues selling their product to international markets and must ship it through other provinces in order to access the ocean for transportation to Asia. Since Canadian pipeline infrastructure is limited, companies typically rely on railways to ship oil to refineries on Canada’s eastern coast, such as Saint John, New Brunswick’s Irving Oil Refinery and Sarnia, Ontario’s Chemical Valley.

Canada’s rail infrastructure is the most economical option, in terms of both shipping capacity and geographical scope as several refineries and shipping ports connect to the railway lines. Rail, however, has proven to be a more dangerous option than pipelines.

The tragedy in Lac-Mégantic, Quebec demonstrates how dangerous crude oil transportation by rail can be. There were also accidents considered less severe, such as earlier this month when a train derailed while transporting four cars of crude oil near Plaster Rock, New Brunswick, threatening the environment and those living in the surrounding area.

These accidents have compelled Canadians to question if transporting oil is safe at all, which has some pondering whether barring its transportation is the right solution. That, however, is not a sound policy option for two primary reasons.

First, some studies have shown that pipelines are a much safe alternative to rail, such as Intermodal Safety in the Transportation of Oil recently released by the Fraser Institute. This report examined pipeline safety in the United States and found that per billion tonne-miles of petroleum transported by rail, there was an average incident rate of 2.08 between 2005 and 2009.  Contrasting these figures with pipeline incidents, of which the average incident rate was only 0.58 per tonne-mile during the same period, the Fraser Institute numbers show that shipping crude via pipeline is 3.6 times safer than railway transportation. It is also important to note that, between 2005 and 2009, there were 23.9 billion tonne-miles of oil transported via rail, compared to 584.1 billion tonne-miles via pipeline.

While these findings are well founded, other studies have different conclusions. The Association of American Railroads, for example, claims that between 2002-2012 rail had a spill rate of only 0.38  per million barrel miles compared to 0.88 for pipelines. Depending on the numbers, though, there are different outcomes. Nevertheless, these contradictions show more that there is a need for this debate as the issue is in many ways still unresolved.

The second reason for not barring the transportation of crude is that the oil sector serves a major role in Canada’s economy. Energy projects contribute significantly to the livelihood of Canadians and restricting those developments would have a negative effect. They also create massive amounts of economic activity. For example, in October 2013, roughly 8 per cent of Canada’s GDP came from mining, oil, and gas extraction. Atlantic Canada can also benefit from increased pipeline infrastructure, which I touched upon in an earlier article on the Energy-East Pipeline.

In conclusion, pipelines transport a majority of crude, but we must be mindful of the fact that pipelines could be much safer than rail for transporting crude when considering newer and larger projects such as Energy-East and Northern-Gateway in the future. There are strong arguments from both sides showing the need for a rigorous debate on this issue.

Randy Kaye is a 2013-2014 Atlantic Institute for Market Studies’ Student Fellow. The views expressed are the opinion of the author and not necessarily the Institute

Regulation or Moratorium? New Brunswick’s Fracking Future

Shale gas development is a contentious issue in Atlantic Canada. Public concerns over fracking encouraged Newfoundland and Labrador’s (NL) Progressive Conservative government to impose a moratorium and, similarly, the newly elected Nova Scotia (NS) Liberals promised continue the province’s ban on fracking.

In New Brunswick (NB), where seismic testing is determining the possible opportunities for shale gas development, this issue has become an even hotter debate topic.

NB’s Progressive Conservative government asserted that seismic testing will continue and the opposition Liberals–with support from local Aboriginal leaders and other opposition groups–have recently renewed their call for a fracking moratorium.

While there are serious concerns that must be addressed, however, a fracking moratorium is not a sound policy route: there is a risk of shutting down the debate on what could be a major boost for Atlantic Canada’s economy.

The principal public concern surrounding fracking is the contamination of drinking water. Some observers suggest that the fracking process could contaminate drinking water and damage water tables from which people draw their wells. Water contamination is a serious concern for individuals for obvious reasons and, as such, due consideration must be given. There are others, though, who argue that this is not necessarily the case (although, this is, in and of itself, another debate).

However, a moratorium is not an appropriate policy route to deal with these concerns for two reasons.

The first reason is that banning fracking would discourage companies from exploring for possible shale gas opportunities. NB’s shale gas reserves are still largely unknown and not exploring what the province has available would be an irresponsible policy.

The second reason is that a moratorium prohibits constructive discussion on the issue. In other words, banning fracking gives more legitimacy to the anti-shale gas side, which could result in the destruction of legitimate arguments from the pro-shale gas side.

Regulation, rather than moratorium, is a much better policy tool for government to use in dealing with the fracking industry.

Adrian Park, from the University of New Brunswick, recently published an article that notes jurisdictions in the United States that have experienced horror stories associated with fracking are by and large those with weak regulations. Park’s article also points out that those jurisdictions that have developed the resource alongside strong regulation, such as North Dakota and British Columbia, have experienced far fewer publicised horror stories.

British Columbia, for example, requires oil and gas companies to ensure there are no adverse effects on the quality or quantity of water where development is happening. The province also has the Surface Rights Board (SRB), which requires natural resource companies to compensate landowners for damages resulting from resource extraction.

Ultimately, other governments must follow-suit, especially in Atlantic Canada where the economic possibilities from shale gas development are largely unknown. North Dakota and British Columbia are success stories in the fracking industry because they chose a policy route that allowed the industry to develop in a safe manner: they choose to regulate and have the discussion rather than close the debate.

Randy Kaye is a 2013-2014 Atlantic Institute for Market Studies’ Student Fellow. The views expressed are the opinion of the author and not necessarily the Institute