/business.financialpost.com/2015/02/04/transcanada-about-to-enter-the-rail-business-as-keystone-xl-delay-drags-on/" style="margin: 0px; padding: 0px; outline: 0px; color: rgb(0, 102, 153); text-decoration: none;" rel="noindex nofollow" target="_blank">TransCanada about to enter the rail business as Keystone XL delay drags on
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1.14em georgia, "times new roman", times, serif; margin: 0px 0px 0.83em; padding: 0px; color: rgb(51, 51, 51); font-size-adjust: none; font-stretch: normal;"> “We are approaching 1.2 million barrels per day of [rail-] loading capacity — nobody has waited for Keystone XL pipeline to get built,” Russ Girling, president and CEO of the Calgary-based pipeline operator, said Wednesday following a speech to a business audience in Toronto.
1.5em georgia, "times new roman", times, serif; margin: 0px 0px 0.83em; padding: 0px; color: rgb(51, 51, 51); font-size-adjust: none; font-stretch: normal;"> Before oil prices sank, Canadian producers shipped oil on rail to fetch much higher West Texas Intermediate oil prices on the U.S. Gulf Coast than they could at the Hardisty terminal in Alberta. The business made sense even after taking into account transportation costs as high as $21 per barrel of oil on rail, compared to $7 via pipeline.
1.5em georgia, "times new roman", times, serif; margin: 0px 0px 0.83em; padding: 0px; color: rgb(51, 51, 51); font-size-adjust: none; font-stretch: normal;"> But that business model is eroding. While crude prices fell 48% last year, that’s not precisely what triggered the collapse — it’s the narrowing of Western Canada Select’s discount to under $13 compared to WTI and Mexican Maya that’s derailing the business.
1.5em georgia, "times new roman", times, serif; margin: 0px 0px 0.83em; padding: 0px; color: rgb(51, 51, 51); font-size-adjust: none; font-stretch: normal;"> “That would be similar for WCS, and as that narrows, people gravitate to pipe if they can,” says Jenna Delaney, an analyst with Bentek Energy, a forecasting unit of Platts. “Of course those barrels — if they need to move — are still going to jump on rail. It just won’t be an economic move,” Ms. Delaney said.
1.5em georgia, "times new roman", times, serif; margin: 0px; padding: 7px 0px; color: rgb(51, 51, 51); border-top-color: gray; border-top-width: 1px; border-top-style: dotted; font-size-adjust: none; font-stretch: normal;"> U.S. oil railcar market collapses as foreign crude makes comeback
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1.5em georgia, "times new roman", times, serif; margin: 0px 0px 0.83em; padding: 0px; color: rgb(51, 51, 51); font-size-adjust: none; font-stretch: normal;"> Rail cars carrying crude fell to 13,773 units last November, compared to 15,672 during the same month in 2013, according to Statistics Canada.
1.5em georgia, "times new roman", times, serif; margin: 0px 0px 0.83em; padding: 0px; color: rgb(51, 51, 51); font-size-adjust: none; font-stretch: normal;"> The meagre growth in rail volumes comes at a time that new facilities are opening up. USD Group LLC opened a terminal in Haridsty last June with capacity for two 120-railcar unit trains, equivalent to 172,639 barrels per day.
1.5em georgia, "times new roman", times, serif; margin: 0px 0px 0.83em; padding: 0px; color: rgb(51, 51, 51); font-size-adjust: none; font-stretch: normal;"> Altex’s seven terminals in Western Canada have a combined capacity of 75,000 bpd, but volumes stand at around 35,000 bpd.
1.5em georgia, "times new roman", times, serif; margin: 0px 0px 0.83em; padding: 0px; color: rgb(51, 51, 51); font-size-adjust: none; font-stretch: normal;"> Canadian Pacific Railway Ltd. has reduced its forecast for crude oil shipments this year, although it still expects the segment to grow around 25-30%.
1.5em georgia, "times new roman", times, serif; margin: 0px 0px 0.83em; padding: 0px; color: rgb(51, 51, 51); font-size-adjust: none; font-stretch: normal;"> “This is why we have reduced our expectation in terms of this market, but the investments are being put in place, and the markets will need those services and we think they will need them, not only in 2015, but also for the long term,” CN chief executive officer Claude Mongeau told analysts during a conference call in late January.
1.5em georgia, "times new roman", times, serif; margin: 0px 0px 0.83em; padding: 0px; color: rgb(51, 51, 51); font-size-adjust: none; font-stretch: normal;"> Still, the capacity keeps coming. Altex is building a unit train terminal in Lashburn, Sask. that would take the company’s capacity to 110,000-bpd.
1.5em georgia, "times new roman", times, serif; margin: 0px 0px 0.83em; padding: 0px; color: rgb(51, 51, 51); font-size-adjust: none; font-stretch: normal;"> TransCanada Corp. CEO Russ Girling forecasts oil terminal loading capacity in Western Canada to reach 2 million bpd from its current level of 1.2 million bpd, and plans to build loading terminals around the company’s storage facilities.
1.5em georgia, "times new roman", times, serif; margin: 0px 0px 0.83em; padding: 0px; color: rgb(51, 51, 51); font-size-adjust: none; font-stretch: normal;"> Rail companies are also looking to raise rates for crude transportation. In addition, new safety rules in light of Lac Megantic tragedy could also cost the wider economy $60 billion, according to the Railway Supply Institute Committee on Tank Cars.
1.5em georgia, "times new roman", times, serif; margin: 0px; padding: 0px; color: rgb(51, 51, 51); font-size-adjust: none; font-stretch: normal;"> “We are not expecting to see rail entirely disappear over the next couple of years due to the pipeline constraints — and because of arbitrage economics that would pop up in different markets,” Ms. Delaney says.