May 4, 2023

How Should We Move Oil?

The Pros and Cons of Oil Pipelines Compared to Trucks and Rail.

More than a third of all energy consumed worldwide comes from oil, and its production and use is expected to grow over the next decade.

In 2020, global oil production fell to 88.4 million barrels per day, down from a previous high of 95 million barrels in 2019, due to the pandemic and the resulting economic slowdown. Despite this short-term drop, the International Energy Association predicts that production will reach 104.1 million barrels per day by 2026.

Once extracted, oil must be transported to refineries and other facilities before being delivered to end-users. Most oil is moved over land by pipelines, with trucks and rail making up the difference.

Canada and the US have a combined 480,000 km (298,000 miles) of transmission pipelines spread out across the continent capable of moving large quantities of oil over long distances. Since 2008, the two countries have added approximately 64,000 km (40,000 miles) of new pipelines. However, increasing public resistance to new oil infrastructure investments has led to the cancelation or delay of major projects, including the controversial Keystone XL pipeline.

This article will compare the transportation of oil via pipeline vs. truck and rail.

Transporting Oil Through Pipelines

High Volume Over Long Distances

Pipelines are vastly superior to truck and rail transportation when it comes to moving large volumes of oil. A tanker truck can carry about 200 barrels of oil, while a fully loaded train can move 60,000 barrels.

However, these numbers are dwarfed by the capacity of pipelines. For example, the existing Keystone pipeline can move 591,000 barrels per day, while the canceled Keystone XL pipeline was intended to move an additional 830,000 barrels/day across nearly 1,200 miles from Alberta to Nebraska.

This efficiency makes transporting oil through pipelines a far more cost-effective option. It costs shippers only $5 to move a barrel of oil by pipeline, significantly lower than the $10 - $15 required to transport by train, or the $20 to ship by truck.

Safety and Environmental Impact

The environmental impacts of new pipelines and oil infrastructure projects are always a primary concern. Environmental damage during construction can have negative consequences on surrounding ecosystems, while spills or other incidents can irreparably harm wildlife. It is generally agreed that pipelines are a safe and effective method to transport oil, though leaks and spills still occur. The Government of Canada states that 99.999 percent of oil transported through federally regulated pipelines moves safely and that only small amounts are spilled and not recovered.

However, a separate study comparing Canadian oil spills from 2011 to 2018 found that pipelines spilled a total of 3,470,000 gallons of oil compared to 734,000 gallons for rail.

These numbers are somewhat skewed by the fact that pipelines move much greater volumes of oil, so to get a direct comparison, another study looked at spills per million tons of oil moved per mile. It found trucking was the worst offender, spilling 326 barrels, followed by pipelines at 269 barrels, and rail at 83 barrels.

In the US, major oil pipeline spills such as the 2013 spill in North Dakota, the 2010 spill in Michigan, and the 2017 spill in South Dakota all released hundreds of thousands of gallons of oil and cost tens or hundreds of millions in clean up, recovery, and fines. Further, the remote nature of these pipelines means spills often happen away from roads and infrastructure, complicating efforts for clean-up and recovery crews.

Jobs and Economic Impact

Pipeline infrastructure projects can have a positive economic impact both locally and nationally. Transporting oil for export allows countries to access higher prices on world markets, while high-paying jobs are created to build, manage, and operate the pipeline.

It is estimated that pipeline operation and construction contributed $46.9 billion to the US GDP from 2015 – 2016. Similarly, the Alberta government estimated that the Keystone XL pipeline would have contributed $2.4 billion to Canada’s GDP if completed.

However, any conversation regarding job creation must consider that most construction jobs are temporary. A US State Department report concluded that the proposed Keystone XL pipeline would require 10,400 workers for 4 to 8 month periods. This is the equivalent of about 3,900 full-time, full-year positions. Once finished, the pipeline would only require about 35 full-time permanent and 15 temporary positions, a negligible amount when viewed through the lens of the entire labor force.

Transporting Oil by Truck and Rail

Existing Infrastructure and Minimal Investment

Rail is the next best option for moving large quantities of oil. In the US, rail transportation peaked at around 10 percent of American crude production with nearly 1 million barrels a day moved between 2010 and 2014. For comparison, pipelines moved nearly 9.3 million barrels per day in 2014.

The main benefit of rail is that the infrastructure already exists and requires little upfront investment. Consider the construction costs of a new pipeline. According to Oil & Gas Journal, it cost an estimated $6.57 million to build a single mile of pipeline in 2017. This can vary significantly depending on the diameter of the pipe, the type of oil being transported, and the local terrain and landscape. Construction projects take years and are often further stalled by permitting and regulatory processes, political and social resistance, and environmental impact assessments.

Because oil must be transported once it is taken out of the ground, companies have been willing to pay the higher costs to ship by train as pipelines reach capacity and new projects are delayed or canceled.

Flexibility and Speed

In addition to providing an alternative when pipelines are unavailable, rail can be the best option when companies need flexibility and speed. Pipelines are fixed, meaning they can only transport oil from one location to another that is directly on the route. They are also surprisingly slow. It takes 40 days for oil to travel from North Dakota to the Gulf Coast via pipelines. The same trip takes only five to seven days by train.

Shipping by rail also gives companies more flexibility to respond to changes in supply and demand. Pipelines typically require long-term commitments to ensure access, and companies must pay for reserved capacity regardless of how much they actually use. Rail, on the other hand, generally allows for greater control and shorter contracts, meaning transporters can adjust their shipments in response to the market.

Safety and Environmental Impact

As mentioned, rail contributes to oil spills and other environmental damage. Increased reliance on rail has also led to concerns over C02 emissions. Pipelines do emit some greenhouse gases from leaks and the fuel burned at compressor stations, but diesel-powered trains emit about 70 percent more greenhouse gases than pipelines. In response, both Canada and the US have introduced new standards to accelerate investment in fuel-efficient locomotives.

Looking at safety, trains loaded with oil can become extremely dangerous in the case of emergency or derailment. Unlike pipelines, trains often travel through densely populated cities and towns, increasing the risk of severe accidents with life-threatening consequences.

This risk was highlighted in 2013 when an unattended runaway train carrying more than 2 million gallons of oil jumped the tracks at over 65 mph in Lac-Megantic, Quebec. The train burst into flames and exploded, resulting in the deaths of 47 people and the destruction of most of the downtown core.

How to Best Transport Oil Remains a Crucial Question Going Forward

Each method of transporting oil has advantages and disadvantages. Pipelines are highly efficient and cost-effective once constructed but require significant upfront investments in time and money. Rail, on the other hand, provides readily available infrastructure and greater flexibility over how, when, and where oil can be moved. Trucks remain essential for last-mile delivery to fuel stations and other facilities that are not connected to other networks.

The question of how to best move oil from the production facility to refineries and on to end-users remains. And, for the time being, oil is a vital natural resource for both Canada and the US, and both countries will continue to invest in new ways to ensure it reaches domestic and international markets in a timely, safe, and cost-effective manner.

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Is Canada Really in a Recession?

December 23, 2023

Context A CBC News article discussed the possibility of the Canadian economy heading into a recession, or whether the country has already passed that threshold. The article discussed this possibility based on slowed growth, high inflation, and the Bank of Canada’s continued interest rate hikes. Analysis A recession is a significant reduction in economic activity that occurs over a length of time, usually months or years. One of the most accepted definitions of a recession comes from the economist Julius Shiskin in 1974, who identified the threshold to an economic recession as two consecutive quarters of declining GDP, although economists often argue about the comprehensiveness of this measure. The causes of a recession can be quite complicated and have many contributing factors. Some common examples include a sudden economic shock such as the recent COVID-19 pandemic, excessive debt, asset bubbles, inflation, deflation, or large technological changes. One major factor influencing the probability of an economic recession includes rising interest rates from the Bank of Canada, which has implemented the highest hike in the shortest amount of time in all of the bank’s history, raising the rate over eight times since 2022. The Bank of Canada increased interest rates in order to curb inflation since rising interest rates discourage taking on debt and spending. This further encourages companies to lower prices or slow inflation to increase demand. Currently, the Bank of Canada is keeping at the 5.0 percent rate but has said that further hikes are not off the table as inflation may continue to exceed acceptable rates. Increases in interest rates can certainly contribute to or precede a recession. In fact, the Bank of Canada has raised interest rates three times to slow inflation since the 1960s and all three times this action led to an economic recession. Current fears of a looming economic depression are also not unique to Canada, as following the COVID-19 pandemic, the global inflation rate increased to 8.73 percent in 2021. This was due to supply chain issues, as well as the effect of the Russia-Ukraine War creating rising food and energy prices, as well as general fiscal instability. A majority of the World Economic Forum’s lead economists agreed earlier this year that we could see the beginning of a global recession starting in 2023, which would certainly affect the Canadian economy. The article also discusses the Canadian economy’s slowed economic growth, as the GDP has stagnated in the second quarter of this year. However, it suggests other factors may explain the decrease, including striking port workers in British Columbia, and the resulting negative effect on economic activity. An RBC report mentions how on a per-person GDP basis, there has already been a decline for four straight quarters despite a surge in population growth, and concludes overall predictions for GDP growth do not look promising despite local factors including Canadian wildfires and strikes. They also point to a 0.5 percent increase in the unemployment rate over the past few months, which has historically tended to indicate a looming recession.

Ottawa Mayor and Lansdowne Park

December 21, 2023

Context The City of Ottawa Mayor, Mark Sutcliff released a statement about a revised plan for the redevelopment of Lansdowne, an urban public park containing historic landmarks and commercial venues. The project includes the demolition of a sports arena complex, stadium stands, and the building of a new event center, residential units, and retail space. Despite suggesting the new plan has addressed the concerns of residents, many issues remain. Analysis The City of Ottawa and the Ottawa Sports and Entertainment Group (OSEG) have been in partnership to develop Lansdowne since 2012 and finished an original redevelopment of the park back in 2014. A few years later in 2019, the financial sustainability of the park came to the city council’s attention, and in 2020 the partnership was extended another 10 years with direction to develop a new plan to revitalize Lansdowne. Consultation with community members started in 2020, with the original concept released last year in 2022, and a revised version released this month. Community feedback was acquired through various platforms including public information sessions, an open email for feedback, and public surveys. A summary report of that feedback was published on October 6th, which highlighted the six most common themes of community residents’ concerns. The first concern was related to the size and number of the multiple high-rise apartments which were designed to exceed 30 floors. In the new plan , they have removed one of the three planned buildings, with fewer total units in each, and only one tower with the potential to be built at 40 stories. Residents were also concerned about the loss of greenspace due to the new event center construction. Many people suggested they wanted that greenspace allocated elsewhere, or alternatively, an accessible greenspace roof on the event center. Although in the original plan the city had conceptualized a greenspace rooftop on the event center, this was scrapped in the new plan as it was deemed too expensive to maintain. Respondents wanted a restriction of vehicles to the premises to promote pedestrian safety, a concern that has existed since Lansdowne was first renovated back in 2014. They also wanted more public transportation infrastructure to and from the park, whether that is the local city buses, trains, or cycling infrastructure to reduce congestion on connecting roads. Relatedly, residents also desired more accessible public use space from washrooms to water fountains to usable and free space for people to occupy. The new plan has reduced the number of parking spaces for the residential buildings to meet the Bylaw limit of 0.4 spaces per unit, down from 739 to 336 spaces, while they added 36 new spaces for the event center. In terms of accessible public space, the new plan includes 27,000 square feet of space originally earmarked for the third residential building, now available for an unspecified “public realm.” Residents also wanted more local and less corporate or big-box businesses, to reflect the unique local community better. The new plan does suggest the amount of retail space has been reduced from 108,000 square feet to 49,000 square feet but does not directly address the desire to attract smaller, local businesses. Finally, there was also a concern about financial transparency of how the project is being funded and the resulting impact on the City. The Federation of Citizens Association (FCA) which represents over 70 community groups voted unanimously to oppose the new plan, which comes with a very costly price tag of $419 million, increased from $332 million of the first plan. They cite that the debt comes at a time when the transit system is facing major issues, and the city is struggling with a housing affordability crisis.

Danielle Smith - Conflict of Interest

December 20, 2023

Context Newly elected Premier of Alberta Danielle Smith has defended her cabinet which is coming under fire over conflict-of-interest concerns. Environment and Protected Areas Minister Rebecca Schulz’s husband, Cole Schulz , may be lobbying the government in the areas that the Minister works in. Cole Schulz's firm is working on removing the protection of a threatened caribou range to make room for the oil and gas industry – which has raised concerns over who has Minister Schulz’s ear. Analysis The company that Cole Schulz is a partner with, Garrison Strategies, was hired by the Explorers and Producers Association of Canada and is working to influence the government on the issuing of reclamation certificates for oil and gas sites. The lobbyists are working to gain more access to protected caribou habitats to expand the oil and gas industry. They are hoping to “ address the moratorium on tenure in caribou regions ” which would effectively give them better access to land and investments. The Little Smoky and A La Peche herds in northwest Alberta were protected by a moratorium in 2013 which stopped the granting of new energy leases in this area. At the time, 95 percent of the herd’s range was heavily damaged. Phillip Meintzer of the Alberta Wilderness Association found that though records show that Garrison didn’t contact Environment and Protected Areas directly, the firm’s causes are “ too close for comfort ”. Meintzer also notes that as Garrison works on opening the protected caribou land for Alberta Energy, Environment and Protected Areas should be working on a protection plan for the federally and provincially designated threatened animal . Minister Schulz is working closely with the ethics commissioner, however, Danielle Smith confirmed that “ the ethics commissioner has looked at it, given guidance and there’s no violation [of the Conflicts of Interest Act]”. Cole Schulz also indicated that his firm wasn’t aware that Minister Schulz breached the Act at any time. Meintzer suggests that this situation “ calls for a further look ” from a third party. Sources https://globalnews.ca/news/9988998/alberta-premier-danielle-smith-rebecca-schulz/