Executive Briefings

Nixing of Keystone Pipeline Could Be Boon for Railroad Transport

President Obama's decision to reject the Keystone XL pipeline could come with a heavy side of tank cars. Canadian energy companies need about a dozen crude-laden trains each day to replace the volume of oil that could have been transported through KXL.

Nixing of Keystone Pipeline Could Be Boon for Railroad Transport

Now that TransCanada Corp.'s Alberta-to-Gulf-Coast pipeline has been denied, however, it's clear that the contest between KXL and railroads in Canada's western oil patch wasn't a zero-sum game.

Rail shippers could see a modest boost from the pipeline's defeat, but analysts say Canada's crude-by-rail business must first overcome unfavorable price spreads, potentially burdensome new regulations and below-$50-per-barrel oil.

"Keystone wasn't going to come online until 2018 anyway, so current dynamics around [rail] terminal capacity, today's pipeline capacity and whether there are enough rail cars, those are conditions that are present now," said Graham Brisben, CEO of PLG Consulting, a freight logistics research and advisory firm. "Keystone XL doesn't really affect what's happening right now in terms of crude takeaway."

Over time, Brisben said the 830,000-barrel-per-day pipeline's rejection could "sustain the opportunity" for rail shippers.

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Now that TransCanada Corp.'s Alberta-to-Gulf-Coast pipeline has been denied, however, it's clear that the contest between KXL and railroads in Canada's western oil patch wasn't a zero-sum game.

Rail shippers could see a modest boost from the pipeline's defeat, but analysts say Canada's crude-by-rail business must first overcome unfavorable price spreads, potentially burdensome new regulations and below-$50-per-barrel oil.

"Keystone wasn't going to come online until 2018 anyway, so current dynamics around [rail] terminal capacity, today's pipeline capacity and whether there are enough rail cars, those are conditions that are present now," said Graham Brisben, CEO of PLG Consulting, a freight logistics research and advisory firm. "Keystone XL doesn't really affect what's happening right now in terms of crude takeaway."

Over time, Brisben said the 830,000-barrel-per-day pipeline's rejection could "sustain the opportunity" for rail shippers.

Read Full Article

Nixing of Keystone Pipeline Could Be Boon for Railroad Transport