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Pipeline opponents say CN's crude-by-rail car pitch poses 'risk to company'

VANCOUVER - Opponents of the Northern Gateway pipeline are threatening to turn their sights on CN Rail, as at least one Alberta oil company explores the possibility of transporting oil sands crude to the B.C. coast by rail car.

VANCOUVER - Opponents of the Northern Gateway pipeline are threatening to turn their sights on CN Rail, as at least one Alberta oil company explores the possibility of transporting oil sands crude to the B.C. coast by rail car.

Sixteen environmental groups signed a letter sent to Canadian National CEO Claude Mongeau this week to express opposition to any plans to ship product from the Alberta oil sands west by rail.

"Unfortunately, ... there are far greater fatality, injury and environmental risks when transporting crude oil by rail than by pipeline," the letter said.

"Should CN decide to try to move forward with its proposal, it would face major opposition and risks to the company. We urge you to stop any forward movement with shipping tar sands oil by rail through British Columbia."

It cites a study last year by the Manhattan Institute, a right-leaning American think tank that has endorsed construction of the Keystone XL pipeline from Canada to the Gulf Coast after comparing the safety and accident statistics of rail, road and pipelines.

Mark Hallman, director of communications for CN Rail, said railways have a solid record in transporting hazardous materials.

"Rail complements pipeline in the movement of crude oil. Both modes are safe and the risk of accidental releases of product is extremely low for both modes of transport, with no appreciable difference considering both spill frequency and size," Hallman said.

The groups, including Greenpeace Canada, West Coast Environmental Law and Sierra Club of B.C., cite two 2005 train derailments.

On Aug. 3, 2005, a train derailed west of Edmonton and spilled 800,000 litres of bunker oil and wood preservative into Wabamun Lake. The spill killed birds and fish, polluted the shoreline and forced authorities to truck drinking water into the area for 18 months. Two days later, on Aug. 5, 2005, a derailment near Squamish spilled 40,000 litres of caustic soda into the Cheakamus River, killing half a million fish.

CN pleaded guilty in 2009 to violating federal laws protecting fish and migratory birds and failing to properly remediate a spill, and agreed to pay $1.8 million for both incidents.

An official with the Port of Prince Rupert confirmed that it has had "very preliminary" talks with Nexen Inc., (TSX:NXY) about using trains to bring oil from Alberta to the north coast port city. Discussions began over a year ago, Michael Gurney, manager of corporate communications for the Prince Rupert Port Authority, said Thursday.

"We really want to emphasize that this has not yet even evolved into a project. This is a concept that they are exploring at the port authority," Gurney said.

Production in the Alberta oil sands has outstripped pipeline capacity, and several projects have been proposed to expand Pacific exports — including Enbridge's (TSX:ENB) Northern Gateway pipeline into Kitimat and an expansion of Kinder Morgan's existing pipeline into Metro Vancouver.

The vocal opposition to both projects, along with the precarious future of TransCanada's (TSX:TRP) Keystone XL pipeline, has renewed interest in shipping oil by rail.

The B.C. government itself has withheld support for the Northern Gateway project until the project meets a list of five criteria that includes a greater share of the revenues.

Alberta Energy Minister Ken Hughes spoke of collaboration in his speech to a Vancouver Board of Trade conference on the oil sands, but issued a subtle warning, as well.

The two provinces are neighbours with shared values — and $25 billion in domestic trade annually, Hughes said.

"B.C. is Alberta's gateway to the Pacific … and Alberta is B.C.'s gateway to central and eastern Canada and much of the rest of the continent," the minister said, according to a copy of his speech.

The free flow of trade is critical to the success of the nation, and that goes both ways, he suggested. And he confirmed that Alberta is "looking in all directions" for options to move oil to market.

"Not all roads — or pipelines — or tracks need to come through B.C.," Hughes said. "I have a duty to Albertans to explore all reasonable ways to get the greatest value for the resources we sell.

The Alberta government is considering funding a feasibility study for shipping crude by rail north to an existing tanker port in Valdez, Alaska.

Hallman said CN is already moving heavy crude, light crude and pure bitumen from western Canada to markets in Canada and the U.S.

"While CN is not moving crude oil to Canada’s west coast ports for export purposes today — there is no infrastructure in place at those ports to unload crude oil from rail cars to vessels — the company cannot preclude the possibility of such traffic in future if the infrastructure is built," he said in an email.

CN has moved 99.9 per cent of product without incident, he said — the same as pipelines.

"CN has improved its safety record," Hallman said, adding that last year the railway invested more than $1 billion on track infrastructure and has industry leading inspection practices.

John Carruthers, president of Enbridge's Northern Gateway Pipelines, said the interest in moving oil by rail demonstrates the commercial viability of the industry and the need for Canada to access alternate markets.

Carruthers said rail can play a role in temporary access to markets.

"But clearly when you get into larger volume, longer term, it's more economic and safer to move by pipeline," he said in a telephone interview.