Keystone XL Pipeline, Trains & Regulations

By all accounts, the Keystone XL Pipeline, the line that would transport oil from both Canada and the Bakken oil fields in North Dakota to Texas, is dead.

The Obama administration did a fine job dragging its feet, thereby effectively killing the project, or at least the major portion from Canada to Oklahoma.

However, TransCanada did complete the southern portion of the pipeline that runs from Cushing, Oklahoma to Nederland, Texas. The company expects to complete a smaller pipeline that will transport oil from Nederland to refineries near Houston later this year.

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AP reported “the $2.3 billion pipeline from Cushing to Texas is the Gulf Coast — or southern portion — of TransCanada’s proposed Keystone XL pipeline. This shorter leg will begin transporting on average about 300,000 barrels of oil daily and should end the year at an average of about 520,000 barrels, Pourbaix said.”

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So where does this leave Canada and North Dakota?  The Washington Post reported in April 2013: “If Keystone is rejected [which is was], the oil will just get transported via other pipelines or by rail. And if that’s true, well, there’s really no point in blocking Keystone, is there?” Good Point, and from the Washington Post.

But Keystone was blocked. And why? In my opinion, it was not for environmental or safety reasons, but because BNSF (Burlington Northern Santa Fe) Railroad is owned by Warren Buffet’s Berkshire Hathaway. As most of us know, Buffet is Obama’s pet billionaire and BNSF is the largest rail carrier of crude oil. Keystone would have taken a huge chunk of business from Buffet.

 “Rail and supporting non-pipeline modes should be capable… of providing the capacity needed to transport all incremental Western Canadian and Bakken crude oil production to markets if there were no additional pipeline projects approved,” the State Department said early last year.

The State Department report estimates that shipping Alberta’s heavy crude by pipeline costs about $10 per barrel, with rail in the $15 to $18 per barrel range. Yet, some producers told Reuters that shipping by train to the Gulf Coast could cost as much as $30 per barrel. Small wonder gas prices remain as high as they are.

So now that the pipeline proposal is no longer an option, lawmakers are free to start attacking the rail carriers. They’re an easy mark, being that they are the only game in town.

The Hill reported just 2 days ago that lawmakers are calling for a top down, comprehensive review of the nation’s rules that govern crude oil rail shipments. The two North Dakota senators are pushing the Department of Transportation to enact more stringent rules for the rail shipments, following accidents in the U.S. and Canada.

As an aside; when you see “lawmakers” and “comprehensive” in the same sentence, run for the hills.

“The NTSB (National Transportation Safety Board), in concert with Canadian safety authorities, issued a dire warning last Thursday that, without tougher regulations on railcars carrying crude oil, there would likely be major loss of life, property damage and environmental consequence in future accidents”, The Hill reported.

Now I’m not saying that the rail industry is safe enough as it is. Frankly, I don’t know enough about it make that determination.

I do know this. Government “regulations” never lower the cost of anything. On the contrary; further regulation always increase costs and those increases are then passed on to you know who…us.

The cost of oil and gas is as ridiculously high as it is due to government interference. Now, with the pipeline out of the way, which would actually lower oil costs, the wizards in government are free to jack it up even more through more and more regulation.

But hey, if it saves the life of just one child, it will be worth it, or some such nonsense.

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