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Crude Oil by Rail

northshoreBig news this week out of Alberta as an announcement came highlighting a rail agreement between the Provincial Government of Alberta and both Canadian Pacific Railway and Canadian National Railway. This new agreement will see up to 120,000 barrels of oil shipped per day through 4,400 new rail cars by 2020. While the Province (Alberta) is hopeful the increase in crude oil rail shipments will allow prices to boost revenue and reach international markets more efficiently, it is recognized that this is not a long-term solution. The announcement has not been well received by all parties, however, as questions regarding the capabilities of the aforementioned rail lines ability to service other sectors arises – most significantly, the agricultural industry. While steps were made to ensure ongoing service of grain suppliers in 2017 by the passing of the Transportation Modernization Act (which included the right for financial penalties in lieu of adequate service), skeptics remain doubtful that increased crude oil supply would have no negative effect on the grain industry.

The following article from the Calgary Herald summarizes the situation with the following quote from the Mark Hemmes of Quorum Corporation –

QUOTE

That will cause concern amongst not only grain shippers but with all market segments (potash, coal, sulphur) who are shipping into that corridor,” Hemmes said in an email. “The onus will be on the railways to ensure that their resources grow to accommodate any additional capacity requirements.

UNQUOTE

Time will tell if/how this new agreement will affect the rail service of other industries.