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Finally, A Railway Oil Can Ride On

Posted: 11/20/2012 12:28 pm

A group of Canadian businessmen has obtained the blessing of Alaskan tribes and Canadian First Nations to build a railroad through their lands that could carry up to five million barrels per day from the oil sands to the super tanker port in Valdez, Alaska.

This is truly a nation-building project that must be seriously evaluated by all governments and the oil industry. Preliminary feelers have been placed and it's clear that the concept is the most viable and pragmatic solution for Canada's logistical problems.

The proposed 2,400-kilometre railway would link Fort McMurray, Alta., with the Alaska oil pipeline system then on to the Valdez for export.

The proposal, conceived a few years ago in studies commissioned by Alaska and Yukon, would liberate the stranded oil sands and bypass opposition to new pipelines in both countries.

Other solutions have been proposed, but this is the best for many reasons: The group promoting this realizes that any major infrastructure project is a non-starter without a social licence. So they began by seeking and obtaining local support.

"The greatest strength of our Alberta-Alaska railway concept is the support it has received from First Nations along the route and from the Assembly of First Nations across Canada," said consortium CEO Matt Vickers. He's a former banker from northeast British Columbia with an engineering background and revealed the project in detail to me. "And the railway was first proposed by Alaska and Yukon, which still support it."

His group calls itself G7G, Generating for Seven Generations, based on a First Nations' belief that any major decision today must take into account how it will affect people seven generations in future.

"We found these studies by Alaska and Yukon done in 2005 and 2007, we knew that Valdez faced declines from the North Slope oil fields and we knew that the B.C. pipelines and Kitimat port were opposed. This railway was an obvious solution," said Vickers. "To ensure this could be a real project, we began to knock on the doors of all the First Nations and tribes in Alaska along the route. I finished doing that in July, getting letters of support from all. Plus, in July, I got support from the National Assembly of First Nations in the form of a resolution representing all 603 chiefs in the Assembly."

The group is seeking financial support for a feasibility study from industry, investors, B.C., Alberta and Ottawa. Reception has been somewhat cool, not surprising given the existence of powerful vested interests that support current pipeline proposals, such as China, banks and certain oil patch players.

But this railway trumps alternatives and represents the most important, strategic infrastructure project in recent Canadian history with the added benefit that it bypasses pipeline-and-port politics.

In fact, this deal deserves to be fast-tracked and here's why:

The railway with a single track would cost $8.4-billion and carry 1.5 million barrels per day. A twin-tracked railway would cost $10.4-billion and transport up to five million barrels daily. By contrast, Northern Gateway pipeline to Kitimat on the B.C. coast would cost $5.5-billion and ship up to 525,000 barrels per day; and the Kinder Morgan proposal to Vancouver would cost $4.1-billion and add 300,000 barrels a day to its existing pipeline.

G7G estimates that oil producers would have to pay a per-barrel cost by rail of $6 and $8. By contrast, Northern Gateway would charge $5 a barrel.

Shipping oil to Asia is cheaper, and would be two to four days shorter, from Valdez. "People are surprised at that, but if you look at the map, the mileage is dramatically less across the Pacific Ocean from Valdez compared to Kitimat," Mr. Vickers said. Once in Valdez, the cost to ship to Asia would be $2 to $3 per barrel; to the U.S. Gulf coast via the Panama Canal $3 to $4 per barrel; to the U.S. west coast $1 to $2 a barrel; and to Europe via the Canal $4 to $6 a barrel. This would differ little from shipments out of Kitimat, except for Asia. If the railway was double-tracked Canadian potash, grains, lumber, metals, minerals and other exports could be taken to port for shipment around the world.

The rail line could return from Valdez bringing equipment, supplies and water from the coast to the oil patch, at lower costs compared with current modes and distances.

This deal cannot be ignored because it's the first time a comprehensive agreement with aboriginals has been signed involving a proposed project.

An easement exists (to build a highway from Fort McMurray to Peace River) covering one-quarter of the route. The Alaskans are already investing in infrastructure for this project in anticipation of its approval.

The railway could be built in stages, a single then double track, in conjunction with proposed pipelines if they are approved.

Canadian investors, the State of Alaska, Canadian governments, the oil industry and aboriginal groups could own this dedicated railway, thus allowing the oil to be sold to the highest bidder. Other proposals will make oil producers price captives if there is a single foreign buyer.

This railway is the only alternative if the B.C. pipeline proposals or Keystone XL fails. In fact, it's a superior alternative.

Despite benefits, Canada has become notorious for political sclerosis. Worse, its governments, eager to build hockey arenas or give grants to win votes, are stingy when it comes to visionary ideas. Only $60-million is needed to complete final engineering and environmental studies in order to seek necessary approvals; divided among a few players, that would amount to very little impact on budgets.

The G7G group has reached out only recently, since it signed on the First Nations, but already governments are dragging their feet or cool to the notion. But once a process is launched, Mr. Vickers said the railway could be operating as soon as 2018.

This is about much more than a rail line. This represents the single most important, and most pragmatic way, to underpin Canadian living standards. It's an idea that deserves immediate and serious consideration.

* This article previously appeared in the Financial Post

Loading Slideshow...
  • Northern Gateway President John Carruthers

    (Sept. 4) - Northern Gateway president John Carruthers argues the pipeline is just as important to Canada as the St. Lawrence Seaway and the Canadian Pacific Railway..."when constructed, [they] laid the foundation for significant benefits for generations of Canadians. Our project is no different."

  • Robert Mansell, U of C School of Public Policy

    (Sept. 4) - Robert Mansell, academic director of the University of Calgary School of Public Policy, argued the benefits the pipeline could have for Canada. "Just imagine a situation where, if not for Northern Gateway, you had shut in 525,000 barrels per day for one year. That loss works out to $40-million a day, or $14.4-billion per year," he said.

  • Leanne Chahley, lawyer for the Alta. Federation of Labour

    (Sept. 4) - Leanne Chahley, a lawyer for the Alberta Federation of Labour, questioned the estimated economic gains. "It's still a social science that you're involved in, economics. How much degree of certainty should we give it?"

  • Gil McGowan, Alta. Federation of Labour President

    (Sept. 4 ) - Albert a Federation of Labour argues the $6-billion line would mean 5% less refinery in Alberta and the loss of 8,000 jobs. "China is in the midst of a building boom in terms of refineries and refining capacity, so our fear is that if our policymakers allow this pipeline to be built we'll end up in a situation where our own homegrown refineries are no longer economic and they'll close down," federation president Gil McGowan said. "We'll end up in a situation where we're sending our raw bitumen oil to China and then buying back the refined product."

  • John Carruthers, Northern Gateway President

    (Sept. 4) - Northern Gateway president John Carruthers on the Enbridge's committment to environmental responsibility: "It involves assessing, in the same objective fashion, and according to the same standards, the information or evidence that has been presented by those who are opposed to the development of our project. And it culminates in approving the project under a framework of conditions that will promote reconciliation over division, and fact over rhetoric."

  • John Risdale, B.C. First Nations Chief

    (May 2012) - B.C. First Nations leaders travel to the step of the Alberta Legislature to voice their concerns on the environmental damage. "The pipeline route that they have proposed is following the most major river system that we have and when the river is ruined, the people are ruined, the land is ruined," said Hereditary Chief John Ridsdale of the Wet'suwet'en First Nation.

  • Terry Lake, B.C. Environment Minister

    (Sept. 4) - B.C. Environment Minister Terry Lake on how Enbridge plans to exceed world standards in spill prevention. "We certainly want to clarify with Enbridge some of the comments made over $500-million more of safety improvements and what exactly will that mean," Lake says. "In terms of monitoring, in terms of response capability, how can we ensure that any proponent would have to live up to what we consider world class response and mitigation measures."

  • Economist Robert Mansell, U Of C School Of Public Policy

    (Sept. 5) - <strong>On the chance that the proposed Nothern Gateway pipeline would have a negative effect on central Canada's manufacturing sector</strong>: "It is not credible that one could argue this would cause Dutch disease." "Would it do, as has been alleged -- cause the rate of inflation to go up and then force the monetary authorities to tighten the money supply and thereby shrink the economy? The answer is no. "Monetary policy is based on what's called the Core Inflation Rate, which excludes the price of food and energy."

  • Texas-Based Energy Consultant Muse Stancil

    (Sept. 5) - <strong>In a report submitted to the hearing, Texas-based energy consultant Muse Stancil said the Northern Gateway will have an effect on oil pricing in North America:</strong> "It can be expected to have a material effect on the distribution patterns and pricing dynamics for Western Canadian crude, as crude producers for the first time will have a high-volume alternative to their historical markets within North America," said the Muse Stancil report. "Northern Gateway allows the Canadian crude producers to both stop selling to their least attractive refiner clients (from a pricing prospective) and reduces their need to ship heavy crude via comparatively expensive rail transport."

  • Richard Johnston, UBC Political Scientist

    Sept. 5 - <strong>On the chance the federtal Tories could lose ground in B.C. due to unfriendly policies such as support of pipelines to the west coast:</strong> "Among the risks to their base, I would put Northern Gateway highest," Johnston said. "The risk/benefit ratio (for B.C.) is massively unfavourable in itself and if the government were to force the issue pre-emptively, they would add an additional dimension to the debate, singling out one province for ill-treatment, rather like the NEP and Alberta. I expect Conservative MPs are worrying about this aloud."

  • Elisabeth Graff, B.C. government lawyer

    (Sept. 7) - "Are you willing to acknowledge this is a complex organizational structure that limits the liability of a corporate giant that definitely would have sufficient funds?" she asked. "What we're left with is an entity which you tell us has the financial resources necessary to cover any type of spill, but we're still doubting whether that is possible." "No, I just fundamentally can't accept that," replied Mr. Carruthers. "Because of the investment, everyone would want to make sure there's proper funding available in case of a spill," he said.

  • Janet Holder, Enbridge senior executive

    (Sept. 7) - "We're doing everything in our power to mitigate against a spill." "Believe me, Enbridge doesn't want a spill. It's not what we're in the business for. We're in the business of moving very safely, environmentally sound and in a sustainable way, product from one spot to another."

  • Geoff Plant, B.C.'s head lawyer for the hearings

    (Sept. 7) - "The question [is] whether Enbridge is actually capable of getting the kind of insurance to ensure against the risk of liability," on whether the insurance is there should an oil spill happen.

  • Barry Robinson, lawyer for three environmental organizations

    (Sept. 8) - "If free market economies aren't at play, where's the economic benefit?" asked Robinson about the economic effects of the hypothetical possibility of Chinese interests buying control of the Northern Gateway pipeline.

  • Kelowna resident James MacGregor

    (Spet. 6) - The Avaaz petition <a href="http://www.avaaz.org/en/petition/Stop_Enbridges_Northern_Gateway_pipeline/?whtizcb" target="_hplink">"No Enbridge Tankers/Pipeline in BC Great Bear Rainforest"</a> was started by James MacGregor and has since passed 10,000 signatures. "BC's entire Great Bear Rainforest, its wildlife and the livelihoods of coastal First Nations are all at great risk if Enbridge's Northern Gateway pipeline is approved," he said. "I know I'm not the only one out there speaking up about the pipeline, but I felt like I couldn't sit back and do nothing." (Source: <a href="http://www.vancouverobserver.com/blogs/earthmatters/petition-opposing-northern-gateway-pipeline-clears-10000-signatures" target="_hplink">Vancouver Observer</a>)

  • Hana Boye, lawyer for Haisla First Nation

    (Sept. 17) - On who could end up with ownership stakes: "If we don't know who these investors are, we're not able to determine if they're financially viable, if they're market-force driven or if it's in the interest of Canadians," she said.

  • Crystal Lake pipeline

  • Chris Peters, Engineer

    (Sept. 17)- Peters argues that an approval of the pipeline might mean a setback to Canada's national climate change policy aims to reduce such emissions to by 2020. That cost "should be recorded as a negative and a cost to the planet," said Peters.

  • Crystal Lake pipeline

  • Crystal Lake pipeline

  • trenton falls pipeline

  • Terry Lake, B.C. Environment Minister

    (Sept. 17) - In the worry that in the event of a spill, Enbridge won't have tge insurance to cover the clean-up costs: "Enbridge and Northern Gateway are very aware of that concern now, so we'll look to their response. But we've made it clear that taxpayers will not be left on the hook," Lake said. "I think that the company would argue they have the resources necessary. What British Columbians want to see is an ironclad guarantee that they do have the resources necessary, that the structure and the insurance in place will protect British Columbians from the cost of any adverse event," he added.

 

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