Kerrobert to build oil rail hub: $100-million project largest in Western Canada

By Jason Warick, The StarPhoenix August 15, 2013 -  The announcement of a $100-million rail hub near the town of Kerrobert, which would ship 168,000 barrels of oil per day to U.S. markets, is being met with both enthusiasm and concern. The project 180 kilometres west of Saskatoon could be completed in late 2014. Advocates welcome the expected 200 construction and 50 permanent jobs to the already booming area.

"I think it's a great thing for the town. We're excited about it," Kerrobert Mayor Erhard Poggemiller said.

Opponents say shipping oil by train car is dangerous, pointing to the recent Lac-Megantic, Que., disaster in which 47 people died. They say the terminal will also contribute to Canada's woeful record on emissions and climate change.

"Shipment by rail is not something to encourage," said Saskatchewan Environmental Society policy director Peter Prebble.

The Alberta-based company heading the project, TORQ Transloading, already operates several smaller oil and agricultural shipping ports in the province at Lloydminster, Shaunavon, Unity and other locations. CEO Jarrett Zielinski said Saskatchewan's vibrant economy convinced them to expand.

"We think Saskatchewan is strategically located. It has access to all the products our customers are seeking," he said.

TORQ has been shipping oil by rail - a controversial practice - for three years. Zielinski said the Lac-Megantic tragedy has reinforced the need to continually evaluate safety practices, said Zielinski, a Saskatchewan native. He said TORQ can serve as a model of best practices for the industry.

"It's something that must be done in a safe and ethical way," he said.

The Kerrobert project would be the largest oil-by-rail port in Western Canada.

Its capacity of 168,000 barrels per day is roughly one-fifth the total volume of oil proposed for Trans Canada's Keystone XL Pipeline, which drew widespread protests across North America and currently sits in regulatory limbo.

Keystone, the Northern Gateway line to the British Columbia coast and other pipelines are facing stiff opposition. Canadian oil producers, particularly in the Alberta oilsands, say the delays in pipeline construction mean they can't ship out product fast enough.

Until recently, sending the oil out by train was not economical, so capacity remained limited. As production increased and the pipeline backlog intensified, that all changed.

Kerrobert, population 1,100, sits in the middle of an expanding oil production zone. Poggemiller said there are constantly new wells coming online "to the west, east, north and south."

The oil would pass through the town of Kerrobert to the main CP rail line, where it would make its way to refineries on the east coast or in the U.S. gulf coast. Poggemiller knows there are risks, but hopes the Lac-Megantic disaster will spur everyone involved to make improvements.

"It's unfortunate what happened and I understand the controversy. (But) everyone will have to pull up their socks, and I think everyone will become more stringent," he said.

Prebble said the rail and fossil fuel industries have taken advantage of the fact there is far less regulation and oversight when shipping oil by train than pipeline. The Saskatchewan Environmental Society is not opposed to shipping light crude oil for domestic consumption by pipeline, but is against oil exports, particularly heavier crude. The Kerrobert facility is likely to handle both light and heavy oil.

Prebble said the federal government is looking for ways to improve the safety of shipping oil by rail, but Prebble said a much broader review is needed.

He said Canadians must also decide whether they want to keep expanding production of the oilsands and other heavy oil.

"We should be reducing our emissions. Canada is making very little headway on that," Prebble said.

He said there could be an international agreement on climate change in the next 18 months or so. If Canada decides to sign on, it will have to curb fossil fuel extraction. If that occurs, many of the projects currently proposed, such as the Kerrobert facility, will be severely devalued, he said. "Canada would do well to be cautious," he said.

Canada's leaders in Rail terminal oil capacity:

* Kerrobert

(announced Aug. 14) 168,000

Hardisty, Alta. 120,000 Unity 90,000

Edmonton (Bruderheim) 70,000

Northgate 70,000

Lashburn 60,000

Cromer, Man. 60,000

Southall 52,000

Edmonton 40,000

South Cheecham, Alta. 32,000

Lynton, Fort McMurray 25,000

Source: ARC Financial Research, Aug. 12

© Copyright (c) The StarPhoenix