Wednesday, June 18, 2014

Tar Sands on the Tracks:  Railbit, Dilbit, and U.S. Export Terminals

Tar Sands Train (Credit:
Last December, the first full train carrying tar sands crude left the Canexus Bruderheim terminal outside of Edmonton, Alberta, bound for an unloading terminal somewhere in the United States.

Canadian heavy crude, as the tar sands is labeled for market purposes, had ridden the rails in very limited capacity in years previous — loaded into tank cars and bundled with other products as part of so-called “manifest” shipments.  But to the best of industry analysts’ knowledge, never before had a full 100-plus car train (called a “unit train”) been shipped entirely full of tar sands crude.

Because unit trains travel more quickly, carry higher volumes of crude and cost the shipper less per barrel to operate than the manifest alternative, this first shipment from the Canexus Bruderheim terminal signaled the start of yet another crude-by-rail era — an echo of the sudden rise of oil train transport ushered in by the Bakken boom, on a much smaller scale (for now).  Tar sands producers are particularly motivated to get their crude to coastal terminals and refineries for export.  As we’ve covered in the past on DeSmogBlog, tar sands companies want to export their product, because the low-grade crude is more easily refined into diesel, which has a much larger market in Europe and Asia.  This is the core reason that the Keystone XL, if built, would be little more than an export pipeline, and wouldn’t actually provide more oil to American markets, nor lower American gas and heating oil prices.

The Oil Change International report also shines a light on the fact that though crude exports are banned from the U.S., domestic refineries can legally export crude from Canada.

While crude oil of U.S. origin is subject to export restrictions, no such restriction applies to exports of Canadian oil through the U.S., as long as it can be shown that no U.S. oil was blended.

Shippers wishing to export Canadian oil from U.S. ports still have to apply for export licenses from the Department of Commerce, but these can and have been granted.  Given the lack of pipeline capacity to Canadian ports, it is attractive for tar sands producers to find ways to get their product to a U.S. port where it can be exported.  Crude-by-rail terminals on the West and East Coasts are strategically important as they are closer to Alberta than those on the Gulf Coast, and it is therefore cheaper to reach these ports by rail.

Tar Sands on the Tracks:  Railbit, Dilbit, and U.S. Export Terminals

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