In the weeks since Kinder Morgan’s announcement that it was suspending all “non-essential spending” on the proposed Trans Mountain pipeline, we’ve seen yet another round of concerns about a spike in the shipping of oil by rail.

The argument goes that failing to build Trans Mountain means that excess oil from Alberta will just be shipped to markets by rail — a more costly option with the potential for fiery spills and explosions in the middle of communities, like what happened in Lac-Mégantic back in 2013.

But there are two major issues with such analysis: 1) there’s not enough rail capacity to substitute for pipelines; and 2) transporting oil by rail wouldn’t be nearly as unsafe as it currently is if government updates its rules and enforcement.

Ignoring such realities may allow for convenient pro-pipeline mythmaking, but not for reasonable fact-based debate.

“Governments and industry uses it to fearmonger a little bit to justify pipeline capacity expansions,” said Patrick DeRochie, climate and energy program manager at Environmental Defence. “But if they were actually concerned about mitigating the risks of oil by rail, there are some pretty clear and simple steps they can take.”

Here’s a breakdown of what’s actually going on.

IEA predicts rail exports could nearly triple by 2019

In February 2018, the most recent month that we have data for, Canada shipped a daily average of 134,100 barrels of oil to the United States on trains. While not an insignificant amount, it was nowhere close to the historical high of December 2014 — when oil-by-rail exports hit 175,600 barrels per day (bpd) due to pipeline constraints.

Such figures don’t include oil that’s shipped by rail across Canada. A recent Globe & Mail article reported that more than 150,000 barrels of oil are moved daily on British Columbia’s railways. Much of that ends up being exported to the United States.

To put such numbers in perspective, Alberta produced an average of 3.4 million barrels of oil per day in February. So rail shipments represented only five per cent of the province’s output.

The concern is that those numbers will rapidly rise in the near future, well beyond the December 2014 threshold.

“It’s real and people have been predicting it,” said Bruce Campbell, former executive director of the Canadian Centre for Policy Alternatives and author of an upcoming book about the Lac-Mégantic tragedy. “As production keeps increasing, there’s uncertainty about the pipelines, so there is that looming possibility.”

In March, the International Energy Agency forecasted that Canada’s oil-by-rail exports could increase to 250,000 bpd in 2018 and 390,000 bpd in 2019. Kevin Birn of IHS Markit told Reuters that exports could go higher than 400,000 bpd if pipelines face more delays.

To put all those numbers in perspective, the rosiest forecast would mean an increase of 266,000 barrels per day via rail. Meanwhile, Kinder Morgan’s Trans Mountain pipeline expansion proposes to add more than double that with 590,000 barrels per day of capacity.

CP and CN already facing major backlog of grain shipments

According to the Canadian Association of Petroleum Producers, there’s already a total of 754,000 bpd in rail loading capacity in Western Canada, including 210,000 bpd at Kinder Morgan’s very own co-owned terminal in Edmonton.

So why on earth aren’t oil producers using that spare rail capacity? Well, for the very same reason that some are doubtful oil-by-rail is going to see any kind of major increase: there simply aren’t enough trains to go around.

DeRochie is skeptical about projections by the International Energy Agency.

“There might be a small incremental increase in the oil being shipped by rail, but we’re looking at the tens of thousands of barrels, which is nowhere near the capacity that pipelines would introduce to the system,” DeRochie said.

Canada’s two freight rail companies, Canadian Pacific (CP) and Canadian National (CN), are facing ongoing criticism from grain producers on the Prairies for critical delays that have left massive quantities of wheat and canola unable to get to markets. Grain shipments are ultimately the “bread and butter” of freight rail in Canada — and the companies are failing to adequately service even them.

Rail companies look for long-term shippers

Both companies have rebuffed calls from the oil industry to enter into short-term contracts to ship more crude.

In a January conference call with investors, CP Rail CEO Keith Creel said: “We understand crude is only going to be here for a limited period of time. We are looking for strategic partners with long-term objectives that allows us to have a more stable book of business.”

Meanwhile, CN Rail requires a minimum of a year-long commitment from shippers.

Most oil companies aren’t prepared to enter into long-term contracts and are ultimately banking on new pipeline capacity opening up in the near future. After all, oil-by-rail tends to be more expensive — Birn of IHS Markit recently told CBC News that rail adds about $3 to $4 per barrel in costs — so even the ability to ship backlogged crude to market isn’t necessarily worth it given current oil prices. But rail companies won’t spend on new trains and tracks without commitment.

This week, Bloomberg reported that Cenovus had signed an oil-by-rail contract to start in the second half of the year, seeming to confirm earlier statements by CN.

But workers at CP Rail are on the verge of striking, which could shut down shipping for weeks or months. CN Rail’s CEO has already stated that his company won’t be able to “pick up the slack” if it proceeds. While likely not a long-term issue, the potential strike action represents yet another source of unpredictability for oil producers.

B.C.’s proposed regulations could curtail shipments

Add to those issues the fact that B.C.’s proposed regulations on the transport of diluted bitumen would apply to rail.

In its reference case submitted to the B.C. Court of Appeal this week, the B.C. government outlined regulations that would apply to pipelines transporting any quantity of liquid petroleum products, as well as rail or truck operations transporting more than 10,000 litres of liquid petroleum products.

The proposed regulations would require shippers to meet several spill response criteria to obtain a “hazardous substance permit” from the government.

‘Industry still seems to be running the show’

For the sake of argument, let’s assume that companies evade all these obstacles and oil-by-rail exports triple to more than 400,000 barrels per day by 2019.

There’s simply no reason that shipping oil on trains needs to be as dangerous as it currently is. As we’ve previously reported, there are a wide range of changes that could be introduced by the federal government to greatly reduce risk — amend the Railway Safety Act to restrict certain volumes of dangerous goods, accelerate the phase-out of existing railcars, increase the number of on-site inspections and improve public transparency.

But with the exception of minor changes, the federal government hasn’t moved to make rail transport of oil safe

“The industry is powerful,” Campbell said. “I’ve talked a lot about regulatory capture. Transport Canada, as far as I can tell, is still as dysfunctional as ever. Industry still seems to be running the show, and resources seem to be as wanting, to say the least. You’ve got a weak regulator with insufficient resources.”

The report of the Railway Safety Act Review is expected to be released soon, but Campbell is “almost positive” that it won’t lead to a fundamental rethinking of the system.

Shipping raw bitumen by rail eliminates costly diluent, reduces risk of explosions

There are actually many upsides to transporting oil by rail instead of pipeline.

It physically moves faster in unit trains than pipeline, and doesn’t mix with other grades of petroleum as it does with pipeline “batching.” Rail terminals are also quite low in cost — the Canadian Association of Petroleum Producers reported in 2014 that a typical unit train terminal ranges between $30 million to $50 million and can be paid off in five years or less.

There’s also the potential to ship raw bitumen by rail in a form known as “neatbit.”

As the name suggests, diluted bitumen that’s transported by pipeline requires diluent, a costly natural gas condensate that takes up about 30 per cent of volume in a shipment. Diluent also serves as the volatile component of the mixture, which can explode in a crash. Shipping bitumen by rail without diluent would save companies money and prevent the risk of explosions.

But it requires upfront costs to purchase heated tanker cars and special loading terminals. It’s effectively the same thing preventing the electrification of freight rail, which would greatly reduce greenhouse gas emissions and fuel costs: it just costs too much cash to get started, even though the payoffs would be enormous. Until the government regulates such activities, it likely won’t happen — and the safety of communities will continue to be at risk.

“The reality is that the stuff is going to keep rumbling through Canadians towns and cities across the country,” Campbell said. “While it’s doing that for the next five years or more, make it safer. There are things that can be done.”

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In recent months, there’s been a re-emergence of one of the oil industry’s most adored tropes: that without new pipelines, companies will ship oil by rail and threaten entire communities with derailments, explosions and spills.

The jury’s still very much out on whether shipments will actually increase by much more than what we’ve seen in the past. Regardless, there’s one thing that strangely never gets mentioned by proponents of the argument.

Transporting oil by rail doesn’t have to be nearly as dangerous as it currently is.

In fact, there are many rules and regulations that could be implemented by the federal government to help avoid another disaster like what happened in Lac-Mégantic, Quebec, or Gogama, Ontario.

ICYMI: How the Spectre of Oil Trains is Deceptively Used to Push Pipelines

“We live within metres of the transcontinental CP line,” Patricia Lai, co-founder of Safe Rail Communities, told DeSmog Canada. “This is very real for us on a daily basis, and we know this exists for communities across the country. It’s fantastic to say that you’re committed, but we really need some action to happen more quickly.”

Here are just a few things the federal government can do to dramatically improve oil-by-rail safety.

Require Proper Assessments for Oil-By-Rail Projects

As MP Linda Duncan put it in an interview with DeSmog Canada, rail is the only industrial sector that’s effectively exempt from the Canadian Environmental Assessment Act.

To be sure, there are provisions in the legislation related to rail. But the way that environmental assessments work is that a “physical activity” such as building a new pipeline or dam of a certain length or capacity will trigger an assessment.

An assessment will get triggered if a new railway of 32 kilometres or more is built. Same with a rail yard with “seven or more yard tracks or a total track length of 20 km or more.” But the trigger doesn’t have anything to do with what’s actually being shipped on existing CP or CN railways.

“It doesn’t matter if one of the two major rail lines increases by a thousand-fold the transport of dangerous goods,” said Duncan, who introduced a private member’s bill in 2016 to improve oil-by-rail safety.

“They can transport whatever they want, at any time, in an overloaded many-mile-long train and continue not to maintain their tracks or trains properly.”

Duncan’s bill would require two related changes.

The first would amend the Railway Safety Act to restrict the shipment of dangerous goods to certain volumes unless the transport minister authorizes an exemption. Secondly, the Canadian Environmental Assessment Act would require the environment minister to trigger an assessment if the activity poses a “potentially significant risk to the environment, human life or public health.”

“What I’m proposing is the tip of the iceberg,” said Duncan, who previously served as opposition transport critic.

While Transport Minister Marc Garneau has repeatedly stated that rail safety is a top priority for him and the federal government, he hasn’t yet voiced support for the bill.

Charles Hatt, staff lawyer at Ecojustice, said he’s seen something similar in his communications with Environment Minister Catherine McKenna on the subject. Ecojustice has requested the federal government to order assessments on all oil-by-rail terminals regardless of size.

“We know the rather appalling gap in the legislation for these kind of activities was pointed out directly to the minister and we suggested actions she could take, and she chose not to,” Hatt told DeSmog Canada. “There’s no doubt what this government thinks about this issue.”

Six Simple Ways Canada Can Make #Oil-By-Rail Way Safer https://t.co/jJGYuHzchh #cdnpoli #oiltrains #neatbit #lacmegantic #gogama

— DeSmog Canada (@DeSmogCanada) November 15, 2017

Accelerate Phase-Out of Older Train Models

In July 2016, the federal government announced the accelerated phase-out of the DOT-111 railcar for transporting oil.

That was the same model of railcar used in the Lac-Mégantic disaster, long criticized for being susceptible to puncture and explosions due to insufficiently thick walls and lack of full heat shield. Now, crude oil is transported by models such as the CPC-1232 (a modified version of the DOT-111) and the new DOT-117, which will replace all models by 2025.

ICYMI: What Have We Learned From the Lac-Megantic Oil Train Disaster?

But that’s many years away.

According to Bruce Campbell, former executive director of the Canadian Centre for Policy Alternatives and author of an upcoming book on the Lac-Mégantic disaster, about 86 per cent of tank cars that transport crude oil are the modified versions of the DOT-111. Those only represent a slight improvement and have already been involved in multiple explosive derailments.

“It’s great that tank cars will have improved by 2025,” Lai, from Safe Rail Communities, said. “But we don’t even know for sure if those tank cars are strong enough.”

Reduce Volatility of Oil Before Shipment

An associated issue is that companies could easily reduce the volatility of oil by a process called “stabilizing,” which sees the flammable natural gas liquids removed from the product.

But that would cost money, around $2 per barrel according to North Dakota regulators.

“Oil companies have resisted strenuously doing anything to stabilize oil before it goes into the tank cars, removing its most volatile components,” Campbell said in an interview with DeSmog Canada.

ICYMI: Fiery Saskatchewan Train Derailment Raises Fresh Questions About Oil-By-Rail Safety

“There’s a way to transport bitumen in its raw form, which is not volatile. But that requires special heated cars.”

Raw bitumen, also referred to as “neatbit,” would greatly reduce the amount of diluent used in shipping bitumen and in turn decrease the risk levels of oil-by-rail. The process would require a significant amount of capital investment, and hasn’t been explored much by industry.

End Self-Regulation, Increase Government Enforcement

In 2001, the government introduced a new approach to regulating rail, called “safety management systems.” Essentially, it means that rail companies craft and implement safety protocols and the federal government audits them.

But critics don’t think it’s nearly sufficient.

“It’s self regulation if it’s the companies doing it,” Campbell said.“The whole idea was that it was supposed to be an additional layer to conventional direct oversight. Of course, it isn’t, because they didn’t give Transport Canada the resources or the money.”

The Transportation Safety Board of Canada specifically identified a lack of safety culture, oversight and enforcement by Transport Canada as contributing factors for Lac-Mégantic, recommending that the department must make sure “not just that [safety management systems] exist, but that they are working and that they are effective.”

Yet in a December 2016 speech at a conference about Lac-Mégantic, Union of Canadian Transportation Employees president Christine Collins said that there still hadn’t been a significant change in the number or quality of inspectors, resources dedicated to the task, or any indication that newly announced federal funding for rail safety would actually improve safety standards.

Campbell added the actual number of rail safety inspectors and dangerous goods inspectors hasn’t increased since at least 2004, despite oil-by-rail shipments skyrocketing in volume.

“On-site unannounced inspections have just shrunk and it’s more and more just a paper exercise,” he said.

Listen to the Public

Then there’s the challenge of actually being able to influence how things are done given that almost all the major decisions made behind closed doors.

“It’s an internal conversation between the railway companies and the ministry,” Campbell said. “There’s no public consultation process. Nominally, they consult with the unions but they’re under no obligation.”

A related impediment to understanding the issues is that there’s very little information out there on the actual amount of oil being transported in Canada. While the National Energy Board reports the monthly volume of exports by rail to the U.S., there’s no similar numbers for internal shipments.

In addition, risk assessments and evaluations conducted by the companies are protected by commercial confidentiality, meaning that the public doesn’t have access to them. Combine that with lack of consultation, and it’s obvious there are improvements to be made when it comes to transparency and consultation.

“We really need to have more input on a regular basis,” Lai said.

“There has to be a better mechanism for moving things forward rather than saying ‘come and share with us what your concerns are and we’ll take it away.’ I think there really has to be some kind of working group or network struck that really does include stakeholders like the public who are really affected by this kind of thing.”

More Solutions At Hand

These solutions could massively increase the safety of oil-by-rail and even then, there are many more waiting to be implemented.

The government could require companies to reroute tracks to avoid heavily populated areas, or implement a new fatigue management framework, or order a strategic environmental assessment of all oil-by-rail shipments, or implement advanced rail safety technologies.

And, according to Duncan, the idea of dangerous oil-by-rail should no longer be used as an argument to push for pipeline projects.

“I get really tired of oil companies arguing they should be able to build pipelines because rail is more dangerous,” Duncan said. “That’s a really specious argument. We need to be making sure that we’re properly reviewing all means of transport of dangerous materials.”

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Either support new pipelines or your community will be incinerated by an oil-carrying train.

It sounds outrageous, but it’s been a foundational argument made by the pro-pipeline lobby ever since the horrific Lac-Mégantic disaster in 2013.

“This is almost like putting a gun to the head of communities, saying ‘well, if we don’t build our pipeline then we’re going to put more oil-by-rail traffic through your community,’ ” says Patrick DeRochie, program manager of Environmental Defence’s climate and energy program.

“I think that’s dishonest and the oil industry’s really manipulating legitimate public concerns about rail safety to push pipelines.”

On Dec. 20, 2016 — less than a month after the federal approvals of the Kinder Morgan TransMountain and Enbridge Line 3 pipelines — Prime Minister Justin Trudeau clearly stated that “putting in a pipeline is a way of preventing oil by rail, which is more dangerous and more expensive.”

The fact that it’s an oft-repeated sentiment shouldn’t overshadow the fact that this is a completely false binary.

Canada is hardly shipping any oil by rail. It never has.

And the only way that oil-by-rail shipments will seriously increase as predicted by the Canadian Energy Research Institute and National Energy Board is if Canada continues with its plan to allow for the massive expansion of Alberta’s oilsands in the coming decades, a move that will undermine calls for a moratorium on all new fossil fuel infrastructure in order to avoid the effects of catastrophic climate change.

Highest Amount Ever Exported by Rail Was Mere 178,000 Barrels Per Day

Here are the numbers on oil-by-rail.

In September 2016 — the most recent month reported by the National Energy Board on the subject — oil-by-rail exports to the United States were 69,292 barrels per day (bpd).

They had dipped as low as 43,205 bpd in June 2016.

This obviously reflects the extremely low per-barrel price that bitumen is fetching from American refineries, which is also why there’s currently around 400,000 bpd of spare capacity in the pipeline network.

Plus, oil-by-rail generally costs more than shipping oil by pipeline, making it an even less viable option in such economic times.

But rail shipments have never been particularly notable relative to total crude oil production.

In fact, oil-by-rail’s high point in recent years was in September 2014, when 178,989 bpd were transported to the U.S.

The same year, Canada was exporting a total of 2.85 million bpd. In other words, at its very peak, oil-by-rail accounted for a mere 6.28 per cent of total exports.

Newly Approved Pipelines Quadruple Capacity Historically Shipped by Rail

It should also be noted that not all oil transported by rail is exported to the States, with some simply transported to other parts of the country for storage or usage for purposes such as asphalt.

For instance, the Canadian Association of Petroleum Producers reports the oil-by-rail hit “almost 200,000 bpd by the end of 2013,” despite the NEB only reporting 166,570 bpd in rail exports during December 2013.

Domestic transport also helps explain why the Canadian Energy Research Institute reported in 2014 that about 35,000 bpd of oil-by-rail from Western Canada wasn’t exported to the United States (and thus not counted by the NEB).

Incredibly, nobody is keeping detailed, accurate numbers on oil-by-rail.

But we can assume — generously — that the highest oil-by-rail shipments have ever hit in Canada is 225,000 bpd (180,000 bpd in exports and another 45,000 bpd in cross-country transport).

The recent approvals of the Kinder Morgan Trans Mountain and Enbridge Line 3 pipelines will allow for the addition of 900,000 bpd in pipeline capacity from the oilsands, assuming a 15 per cent surplus for outages and maintenance.

That’s four times the amount of oil that has ever been shipped by rail, either for exports or domestic transport.

New pipelines are not about “displacing” oil currently being shipped by rail — there’s simply no evidence for that.

Instead, new pipelines are about preparing for a massive expansion of the oilsands by almost two million bpd between 2015 and 2040, and weaponizing people’s fears of oil-by-rail to do so.

How the Spectre of Oil Trains is Deceptively Used to Push Pipelines https://t.co/mWbMw5F4SK @james_m_wilt #cdnpoli #oilbyrail #propaganda

— DeSmog Canada (@DeSmogCanada) January 6, 2017

Oil-By-Rail Unsafe Because of Regulatory Lack

But there’s a second and related key problem with the pipeline versus rail debate, further undermining the argument for new pipelines.

Specifically, that there are technologies and regulations available to ensure that oil being shipped by rail is far safer than what the current rules mandate.

As a result, combined exports and domestic transport via rail could even rebound to 200,000 or 250,000 bpd and we’d never have to seriously worry about a Lac-Mégantic-like disaster again.

How?

Transport Canada could require rail companies to increase the number of inspectors and crew members on trains, reduce speed limits and require certain braking system protocols and better public disclosure.

The phase-out of the old CPC-1232 tank railcars and transition to new and safer TC-117 tank railcars could be accelerated. The federal environment minister could be required to order an environmental assessment of oil-by-rail projects, as recommended in September 2016 by NDP MP Linda Duncan.

‘Neatbit’ Would Reduce Risk of Explosions and Spills, But Initially Increase Costs

And then there’s the increasingly popular idea of “neatbit.”

Bitumen from the oilsands is current shipped in both pipeline and train in a form called “dilbit,” which requires about 30 per cent of diluent to allow it move. The diluent, usually made of a natural gas-based condensate, makes the mixture highly flammable, explosive and difficult to contain in spills.

These characteristics are dangerously compounded in the case of train accidents.

Conversely, “neatbit” only requires one to two per cent of diluent.

The product thus has the consistency of peanut butter, meaning it won’t flow in the event of a spill. It also doesn’t catch fire or explode.

David Hughes, expert on unconventional fuels and author of multiple reports for the Canadian Centre for Policy Alternatives (CCPA), says: “In effect, shipping raw bitumen by rail is likely a safer alternative than pipelines.”

Shipping bitumen as neatbit would arguably save companies money in the long term. But it would also require a bit of upfront capital, and policy direction from governments.

Heavy oil refineries don’t have the infrastructure to receive it. It would take longer to unload. Upstream companies would have to build diluent recovery units and invest in insulated tank railcars with heated coils to keep the bitumen somewhat soft during transport.

And unlike pipelines, oil-by-rail doesn’t result in a “carbon lock-in” given that many other commodities can be transported by rail.

Bruce Campbell of the CCPA has concluded the oil industry “is not in any hurry to make the transition because of the (relatively modest) upfront investment.”

Kai Nagata of the Dogwood Initiative agrees: “The oil companies don’t want to do anything that is inconvenient or that would require them to build new facilities or spend more money. So far, I don’t think there’s much interest in moving that inert form of bitumen in regular rail cars.”

‘It’s Purely Out of a Profit Motive That They Invoke the Comparison’

Not only is it deceptive to claim that new pipelines are needed to replace oil-by-rail, but it also ignores the fact that oil-by-rail can be made much safer than it is at the moment (although it will continue to be more carbon-intensive due to its current reliance on diesel as fuel).

Yet Lac-Mégantic continues to be subtly weaponized by corporate execs and politicians as if these two facts aren’t true, or even worthy of acknowledgement.

Oil-by-rail has never been a major player in Canada. It never will be if international climate commitments are honoured. And even if it is used as a way to offer some flexibility to producers, it can be done in a way that’s safer than current practices require.

Nagata suggests that such players are relying on people’s fears about a non-issue in order to force them to a point of compromise that would allow them to build pipeline expansion infrastructure.

“It’s purely out of a profit motive that they invoke the comparison,” he says. “Not out of any sense of concern for the safety of communities along the route.”

DeRochie agrees: “It’s a legitimate concern. And I think the oil industry grasped onto that and used it as a scare tactic to push pipelines.”

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