Crude by rail a ‘temporary’ solution to pipeline shortage: CN Rail CEO

Image: CN Rail

MONTREAL — The head of Canada's largest railway says ferrying crude remains a lucrative, albeit temporary solution to Canada's pipeline quandary.

“The role of the rail industry is a recent role and probably a temporary role. We're not here to replace pipelines; we're here to be a compliment for a period of time,” Canadian National Railway Co. chief executive Jean-Jacques Ruest told The Canadian Press in an interview.

“We're in a position to be a bridge, if you will, between now and the time that pipelines are being built. We could be a bridge for the next year, two years or three years.”

CN Rail ramped up capacity with more track, crews and locomotives, Ruest said, only to see volumes fall this year from record highs last autumn after Alberta lowered the oil production cap to free up export pipeline space and boost the price of Western Canadian Select amid an oil glut.

Attempts to build or expand pipelines have faltered the last few years, leaving railways to pick up the slack. Major projects such as the Northern Gateway and Energy East pipelines were cancelled, and delays continue to snarl the Trans Mountain expansion, Line 3 replacement and Keystone XL pipeline.

Meanwhile CN Rail and Canadian Pacific Railway Ltd. shipped 23 per cent more oil and petroleum in 2018, according to the Association of American Railways. Crude-by-rail exports hit a record 327,229 barrels per day in October, a 58 per cent year-over-year increase, according to the National Energy Board.

CN's crude-by-rail exports to the U.S. are currently down 40 per cent from December to about 150,000 barrels per day, Ruest said. But year-over-year revenue from petroleum and chemicals still rose 25 per cent last quarter.

Ruest declined to comment on whether he'd been in contact with Alberta's United Conservative Party, which formed government for the first time after Premier Jason Kenney and his cabinet were sworn in on Tuesday.

“They're well-positioned to take action, whichever way they want to go,” Ruest said a few hours later, following CN's annual general meeting in Montreal. “Time will tell.”

© 2019 The Canadian Press

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