The Biden administration’s efforts to kill key oil pipeline projects may boost crude by rail volumes, railroad officials say.
President Joe Biden last month revoked a permit for the Keystone XL pipeline that was under construction to carry oil sands crude from Canada to refineries in the U.S.
“The pipeline was not going to be ready before a couple of years, so I think the positive impact on us might be a few years down the line,” Canadian National CEO JJ Ruest told Bloomberg Business News.
“We do think that the administration's actions … bodes for more strength and more potential demand for crude,” Canadian Pacific CEO Keith Creel told investors and analysts on the railway’s earnings call last week.
But both Ruest and Creel say that conventional crude by rail shipments will eventually shift to pipelines once capacity matches demand.
CN’s shipments of heavy crude, which cannot flow through pipelines, will not be affected by the U.S. efforts to limit pipeline construction, Ruest says.
CP is awaiting the completion of a diluent recovery unit in Hardisty, Alberta, which is set to open later this year and will allow the railway to ship non-flammable bitumen to a Gulf Coast refinery on Kansas City Southern.
The first-of-its-kind facility in Hardisty will remove diluent, which is added to raw bitumen that is extracted from the Canadian oil sands. The process creates a viscous, heavy bitumen designed to move in tank cars. CP and KCS have a 10-year contract to haul the bitumen to a new plant in Port Arthur, Texas.
Restrictions on Canada-U.S. pipelines should create more support for scaling up the diluent recovery facility, Creel says. Initially it will generate two unit trains per day, but that could double if the plant is expanded after it opens.
The Biden administration also is scrutinizing other projects, including the Dakota Access pipeline that’s already handling crude from North Dakota’s Bakken oil patch, as part of wider efforts to shift away from fossil fuels that contribute to climate change.
“We do ship Bakken crude out of North Dakota and, obviously, if something happened with that pipeline, we think that would generate an opportunity,” says John Brooks, CP’s chief marketing officer. “Of course, there's been a lot of noise around that pipeline for a number of years. We've been able to generate some … stable crude-by-rail business out of North Dakota. But I think certainly there is an opportunity for upside if they would move towards shutting it down or putting it on the sideline for a certain amount of time.”
Crude-by-rail volumes declined significantly in the U.S. and Canada last year amid a collapse in energy prices during the pandemic. Canadian crude-by-rail exports to the U.S. fell 70% from April through November of last year, according to the latest data from the Canada Energy Regulator.
This article originally appeared on Trains.com