Pipeline execs raise oil-by-rail safety issues as they press for project approvals

They may not have actually mentioned Lac-Megantic, but executives of pipeline builder TransCanada Corp. didn't have to.

Speaking at an investor conference in Toronto on Tuesday, they pitched the need to get stalled pipeline projects such as TransCanada's Keystone XL through the United States underway.

It would be tragic, said Alex Pourbaix, TransCanada's president of energy and oil pipelines, if the U.S. government rejects the revamped proposal to build the controversial line that would move oil sands bitumen crude to the Gulf Coast for refining and export.

Construction was supposed to begin last year but it's run into bitter opposition in the U.S. from those worried about spills, as well as environmentalists who hope killing the project will curtail oil sands development.

President Barak Obama's administration rejected the initial plan over environmental concerns and is not expected to make a final decision on the project until 2014, a congressional election year.

"And I think it's a real tragedy if this situation continues indefinitely, as pipelines are obviously much more cost-effective," Pourbaix said, according to CBC News. "They are statistically safer and more environmentally friendly to transport oil."

In case the audience didn't get the point, TransCanada chief executive Russ Girling was a little more specific.

"We’ve seen an increase in rail movement, which has put the public safety at risk as well," said Girling, according to the Financial Post.

[ Related: TransCanada boosts Keystone XL cost estimate by $100 million ]

Undoubtedly, the picture that TransCanada's bosses put into the minds of investors was of the giant fireballs erupting from the centre of Lac-Megantic, Que., on July 6. That's when an unattended train of more than 70 oil tank cars full of U.S. crude rolled down a hill, derailed and exploded in the middle of town. The inferno killed 47 people and destroyed much of the town's centre.

A fresher example was also available from an Alabama derailment and fire earlier this month that took no lives but created an environmental mess that's still being cleaned up.

The pipeline sector has had its own problems, including a spate of recent spills in Alberta and the major rupture of an older Enbridge line in Michigan four years ago that fowled the Kalamazoo River, a case which Keystone critics still point to.

But the comments by the pipeline executives play into rising concerns about the mushrooming volume of oil being shipped by rail from Alberta.

CBC News said Pourbaix told the meeting that rail loading capacity for oil in Alberta is expected to double by the end of 2015 to 800,000 barrels a day, close to what Keystone XL would carry. Unloading capacity at the line's terminus is projected to exceed 900,000 barrels a day, he said.

[ Related: Opposition to west-east oil pipeline heats up as questions grow over shipping oil by rail ]

With both Keystone XL and Enbridge's Northern Gateway pipeline project to the West Coast in limbo, pipeline backers have warned oil sands crude will get to market one way or the other. They argue pipelines are inherently safer than rail.

The Globe and Mail reported last week that, in the absence of new pipeline capacity, oil-by-rail volumes have nearly tripled since the beginning of this year to 175,000 barrels a day.

Plans call for three new rail-loading terminals in Western Canada, adding 350,000 barrels of daily capacity, which would boost total capacity to 900,000 barrels a day, economist Jeff Rubin wrote for Globe.

While the terminals are new, the tanker cars carrying the oil are not, Rubin pointed out. Most are of a thin-skinned type that critics say are too vulnerable to ruptures that can spark fires.

"As more oil gets moved around North America, more accidents will surely follow," he said. "We can only hope none of them are on the tragic scale of Lac-Mégantic."

That's more leverage for pipeline company executives like Pourbaix and Al Monaco, CEO at Enbridge, which is awaiting a National Energy Board joint-review panel report on Northern Gateway by the end of this year.

The rail-capacity boom is "proof that the oil sands are going to continue to get developed regardless of whether pipelines are built," said Pourbaix.