May 26, 2011 in Idaho

Megaloads could skip U.S. on rail-truck Canada route

By The Spokesman-Review
 

BOISE – What if giant loads of oil field equipment didn’t have to enter the United States to get from Asia to the Alberta oil sands project in Canada, and what if avoiding the U.S. actually cost less?

That’s the prospect being floated by a railroad company that owns a Canadian seaport. It’s adding a new wrinkle to the debate over equipment transports to the third-largest proven crude oil reserve in the world, where dozens of companies are rushing to develop an oil resource that’s eclipsed only by those of Saudi Arabia and Venezuela.

A court ruling is pending in Montana and an administrative ruling pending in Idaho on the 200-plus megaload transports proposed by Imperial Oil/ExxonMobil, which would take giant modules fabricated in Korea up the Columbia and Snake rivers by barge to Lewiston, then truck them across scenic U.S. Highway 12 in north-central Idaho to Montana and Canada. The loads are so big they’ll block both lanes of the twisting, two-lane highway, creating a rolling roadblock; but they’re too tall to travel on most other routes, including interstate highways.

Delays in getting permits for the transports are worrying Imperial/Exxon, which has 33 loads sitting in Lewiston. Company spokesman Pius Rolheiser said, “We’re at the point now where the permitting delays that we’ve already experienced have put pressure on our project execution plans.”

The new alternative: Instead of coming to Idaho, megaloads could be shipped from Korea through the Panama Canal, up around the United States to Hudson Bay on the east coast of Canada, and from there west by rail, with a final segment by truck.

“There are supposedly thousands of these modules that need to move, over and above the ones that are stuck in Lewiston,” said Gary Long, president and CEO of OmniTRAX, a Denver-based firm and one of North America’s largest private railroad and transportation management companies. “Rail is always cheaper than truck transportation, always. … You can move a ton of freight 480 miles on one gallon of fuel.”

Imperial/Exxon says Highway 12 remains its “preferred option.” It’s also cutting down the loads that are currently in Lewiston so they’re short enough to travel on interstate highways, and it has shipped 45 smaller loads on interstate highways from the Port of Vancouver, Wash., to Canada.

But there could be many more companies looking to bring big equipment to the oil sands, and that’s where OmniTRAX is focused.

“There are a myriad of companies that are operating in the oil sands,” Long said. “We’ve had some discussions with several of the oil companies – they’re interested.”

In 1997, OmniTRAX bought the Port of Churchill on Hudson Bay, the only deep-water Arctic seaport in North America, and the Hudson Bay Railway, which runs from the Port of Churchill into the interior of Canada.

Hundreds of tons of grain are shipped from the port each year to destinations in Europe, the Mediterranean, North Africa and Central America. Said Ian White, president and CEO of the Canadian Wheat Board, “They provide a good service and it is a northern port that is fairly unique in terms of its position.”

One catch to the port: Due to ice, its season is short, generally stretching from early July to the end of October. But Long says there’s plenty of room at the port to bring in hundreds of megaloads during the shipping season, store them there, and stage them for transport by rail to the oil sands whenever the oil companies need them.

“We operate the railroad that serves the port 24/7, 12 months a year,” he said.

The over-land trip, his company estimates, would be 300 miles shorter than the trip from Lewiston through Idaho and Montana to the oil sands. It’d be much farther from Korea to the Port of Churchill by water than to the Port of Vancouver, but experts say that’s really not an issue.

“Ocean-borne transport costs are very low, and are really low as a function of distance,” said James Harrington, a professor of geography who teaches international trade at the University of Washington. “Because once you get something loaded, you go through all the steps and you get the ship under way, then it’s a matter of just keeping it gliding through the water.”

Harrington said the pending expansion of the Panama Canal has seaports around the Northwest worried that they’ll lose lucrative shipments bound for the interior of the United States or Canada once bigger ships can use the canal to take those directly to the East Coast.

Completion of a major enlargement of the canal is scheduled for 2014, according to the Panama Canal Authority.

Long said his company’s rail line already can accommodate loads 30 feet wide, though seven bridges will need upgrades to handle either the height or width of the megaloads. “We’ve already done that analysis, already had discussions with the government of Manitoba regarding that,” Long said. “We could do it as quickly as 12 months – we could probably do it sooner.”

The bridge upgrades would be “in the millions of dollars,” but Long said, “It is a drop in the bucket, I think – it’s a very small amount compared to what would be the total opportunity cost for the oil companies to put those things through.”

He estimated that megaloads could travel by rail from the Port of Churchill to the end of the Hudson Bay Railway at Flin Flon, Manitoba, in two to three days. The final leg of the trip, which would be done by truck, likely would take another two to three days, he said.

OmniTRAX has identified a potential truck route on all-season roads that runs through Prince Albert, Saskatchewan, and then up to Fort McMurray, Alberta, that’s about 750 miles. Long, however, said there is a shorter route, but “We’d have to work with the governments of Saskatchewan and Alberta.”

Long said an all-Canada route to the Canadian oil sands project might raise less opposition than U.S. transport routes. The rail portion, in particular, “does not disrupt the communities at all.”

Imperial/Exxon has sent only one test megaload over the Idaho route so far; it was pronounced a success by both the company and the state Transportation Department, though it knocked out power to two Idaho towns for five hours and closed Highway 12 for an hour. State rules call for megaload transports to not impede traffic for more than 15 minutes at a time in Idaho, and 10 minutes at a time in Montana.

Rolheiser said his company didn’t consider the Port of Churchill for its current project because “we kind of had to look at the routes and infrastructure that currently exist.”

Harrington, the UW professor, said with rail travel cheaper than truck, and ocean travel cheaper than rail, the alternative route could be viable. “It is very conceivable to me,” he said.

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