Understanding Crude Oil Transport Strategies in North America

Abstract

On July 6, 2013, an oil-laden unit train derailed and exploded in Lac-Mégantic, Quebec, killing 47 people, shocking many, and leading to significantly increased public scrutiny of crude oil by rail. Simultaneously, there has been intense scrutiny of several proposed pipelines from the oil sands of northern Alberta. Not only is there concern about the potential environmental impacts of the pipelines themselves, such as a potential spill of diluted bitumen (a form of crude oil to be shipped), but also about the consequences of greenhouse gas (GHG) emissions caused by the energy-intensiveness of bitumen production and refining. From the point of view of the railroads, until such impacts are considered through political and regulatory processes in Canada and the US, railroads deciding whether to invest in capacity to transport bitumen are presented with considerable uncertainty. Using both qualitative and quantitative approaches, this paper characterizes some of this uncertainty and discusses its short- and long-term implications for railroads and policy makers.