| WASHINGTON, March 5
WASHINGTON, March 5 Far less Canadian oil sands
crude reached the Gulf Coast by rail last year than the U.S.
State Department had been expecting, according to data that
could flavor the final stages of the Keystone XL pipeline
In January, the State Department concluded that practically
nothing would hamper development of the Canadian oil sands since
energy companies could easily move the fuel by rail if
TransCanada Corp's pipeline was rejected.
Transportation concerns loom large for Western Canada's oil
sands sector since the energy patch is vast and productive, but
roughly 2,000 miles (3,220 kms) away from the Texas refineries
that can turn the commodity into usable fuel.
In March 2013, a U.S. State Department report cited industry
projections that about 200,000 barrels per day (bpd) of oil from
the Western Canadian Sedimentary Basis (WCSB) would be arriving
at the Gulf Coast by rail before the end of 2013.
But even in December, when deliveries were near their
highest for the year, that tally did not top 40,000 bpd,
according to a Reuters analysis of data released by the Energy
Information Administration last week.
The data, which details individual deliveries, indicates
that monthly oil arrivals by rail were often below 30,000 bpd
early last year and then rose unevenly.
The State Department dropped specific projections for
oil-by-rail shipments to the Gulf Coast in its final Keystone XL
environmental impact study, released on Jan. 31.
Data from Canada's National Energy Board released this week
point to slightly higher deliveries to the Gulf Coast but at
levels still below official forecasts.
Roughly 57,000 barrels per day of Canadian crude reached the
Gulf Coast by rail, the statistics agency said.
Market analysts say they are not surprised that the oil
sands sector has been slow to ramp up rail shipments, given its
greater cost and complexity compared to pipelines.
"It is hard to venture into the oil-by-rail space in Western
Canada and quickly execute," said Michael Wojciechowski, an
energy analyst with Wood Mackenzie in Houston, citing severe
winter weather and engineering hurdles that operators face in
Canada provides more oil to the United States than any other
country and those volumes have been growing.
But while the roughly 2.57 million bpd of Canadian crude
that crossed the border in 2013 has risen by 30 percent since
2010, the share reaching the Gulf Coast fell by about 18 percent
to about 118,000 bpd in that time, EIA data shows.
Midwest refineries have absorbed most of the higher supply,
but existing refineries there are being pushed to capacity,
which is partly driving interest in the Gulf Coast refiners,
Official data suggests only between a quarter and a half of
Canadian crude reaching the Gulf Coast is arriving by train.
Most of the rest is arriving by pipeline.
In order to match the more than 800,000 bpd capacity of the
proposed Keystone pipeline, oil sands operators would need to
put more than 13 mile-long trains laden with crude oil onto the
tracks towards the Gulf Coast, every day.
The feasibility of such a plan weighs on the pipeline
debate, which is now well into its sixth year.
Keystone foes insist that blocking the pipeline will curtail
development of an energy source that is abundant but can only be
reached by burning large amounts of fossil fuels blamed for
worsening climate change.
Supporters of the project argue that although oil sands
crude will be developed with or without Keystone, moving the
product by pipeline is a safer, cheaper option to a massive
increase in oil transported by rail.
While the State Department has concluded that higher costs
are not likely to dent oil sands production, other agencies
including the U.S. Environmental Protection Agency, are more
In April, the EPA asked the State Department to recognize
"the potential for much higher per barrel rail shipment costs".
The EPA, State Department and several other agencies have
about two more months to mull the pipeline plan and weigh in
with the White House.
President Barack Obama has said he will have the last word
on the pipeline but a decision is not expected before May at the
earliest. The deadline for public comment on the State
Department's Keystone environmental impact statement is Friday.