Oil: By Pipe or by Rail, Which Is Less Likely to Fail?
Michael Molitch-Hou posted on October 14, 2019 |

Numerous studies suggest that, given the current climate emergency, no new fossil fuel infrastructure should be built. Not only that, but existing fossil fuel plants should be shut down now if humanity hopes to prevent the Earth’s atmosphere from warming beyond 1.5°C above preindustrial levels. This is both the goal set by the Paris Agreement and a level at which it may be impossible to halt runaway climate collapse. (That doesn’t account for the loss of biodiversity associated with extraction of fossil fuels, which scientists consider equally as dangerous as the climate crisis.)

The Trans-Alaska Pipeline.
The Trans-Alaska Pipeline.

Nevertheless, oil continues to be transported throughout the world to fuel our global society. As long as this remains the case, it is essential to ensure that this volatile material is transported safely, efficiently, and, for those who are counting dollars and cents, cost-effectively. For ground transport, that leaves two dominant options: by rail and by pipeline. In this article, we take a look at both of these methods to determine the advantages and disadvantages of each.

An Oil Primer

Millions of years ago, organic lifeforms just like yourself were wandering this fertile rock—well, maybe not just like yourself. Some creatures were large and scaly, and many more were tiny sea organisms and plant life. Some, like plants, absorbed energy directly from the sun, while others got their boost indirectly from eating those plants or eating creatures that ate those plants.

As those lifeforms died, they were ultimately subject to the heat and pressure of being buried under sedimentary rock. Over the course of millions of years and in the absence of oxygen, this organic matter (mostly zooplankton and algae) was decomposed by bacteria until it became a waxy substance known as kerogen. With more heat and pressure, the matter was converted further into hydrocarbons.

(Image courtesy of Only Zero Carbon.)
(Image courtesy of Only Zero Carbon.)

Since around 4,000 years ago, humans have learned that the black substance that emerged in pits and springs could be extremely useful, particularly when it was set on fire. When even rudimentary bamboo drills were used to unearth crude oil, the stuff would rise to the surface due to the natural pressure of the reservoirs.

As this energy dissipates, artificial means are used to bring the material to the surface, including the injection of water into the well to drive the oil to the drilled shaft. When that no longer works, carbon dioxide, steam, and other gases and chemicals are used to get the last of the oil out of the reservoir. As those reserves run out, industry turns to grabbing the material stored in sand and rocks (tar sands and oil shales) before it has fully transformed into crude oil and forcing the process along with artificial heat and pressure. 

As of 2018, the U.S. was producing levels of crude oil unseen since 1970, and oil imports actually dropped to their lowest levels since 1958. This is largely due to the shale and fracking bubble that began to percolate in 2008. Now, about 86 percent of oil consumed by the U.S. is produced domestically, while 11 percent is imported from outside of the country, including about 29 percent from OPEC countries and 43 percent from Canada.

By Pipeline

Pipelines are by far the most popular means of transporting oil within the U.S., representing approximately 70 percent of oil transport. Oil is moved along steel and plastic tubes ranging from 4 to 48 inches in diameter in networks about three to six feet below the earth. The pipes are themselves protected by a variety of padding materials, such as wood slats, concrete, rocks, high-density polyethylene, and sand padding.

This network is made up of gathering lines for short distances, to move oil from wells to storage tanks; feeder lines, which direct oil from storage tanks and processing plants to transmission lines; and transmission lines that deliver oil from where it is produced to where it is consumed. Pump stations along the lines push the oil to keep it moving, while intermediate delivery stations enable the delivery of oil to customers along the way and block valve stations make it possible to close parts of a pipeline for maintenance. Then, there are final delivery stations for carrying the rest of the oil to the final customer.

Pros

Given that the overwhelming majority of oil is carried by pipeline suggests that there must be overwhelming benefits to such a mode of transport. The biggest advantage of pipelines for the transportation of fluids, oil, or otherwise, is the sheer efficiency.

Think of a pipeline as the carpool lane on a freeway or a railway system without stops. There are no physical barriers to impede its transit. Additionally, because oil fields can be found in remote locations, railways will likely be farther from the source. In turn, pipelines are often the most cost-effective way to move millions of gallons of oil across thousands of miles of land and water.

As a result of this dedicated expediency, it costs much less to transport oil by pipeline—about $5 per barrel, compared to $10 to $15 for rail transport.

Cons

Though pipeline transport is more cost-effective, pipeline construction itself has large up-front costs. For instance, the original Keystone Pipeline, stretching from the tar sands in Alberta, Canada, to refineries and a shipping terminal in Texas, cost $5.2 billion.

Pipelines are also regulated in the U.S. in such a way that it’s impossible to earn more than a specific rate of return. Oil transporters also need to enter into long-term contracts with pipeline companies, meaning that future oil prices and demand must be taken into account. Pricing is likely to become volatile due to climate crisis-related regulations.

Protestors sprayed with water cannons and tear gas by police on behalf of Energy Transfer Partners in freezing cold temperatures at Dakota Access Pipeline. (Image courtesy of Richard Tsong-Taatarii/Minneapolis Star Tribune/ZUMA Wire/Newscom.)
Protestors sprayed with water cannons and tear gas by police on behalf of Energy Transfer Partners in freezing cold temperatures at Dakota Access Pipeline. (Image courtesy of Richard Tsong-Taatarii/Minneapolis Star Tribune/ZUMA Wire/Newscom.)

Speaking of the Keystone Pipeline, many of us remember the shocking images from the protests by the Standing Rock Sioux, along with other activists, against an extension of that project, the Dakota Access pipeline being built across the Missouri River. Fears raised by environmentalists and community members were that a rupture in that area could lead to the contamination of the entire region’s drinking supply, along with the natural habitats of area wildlife.  

According to data from the Pipeline and Hazardous Materials Safety Administration (PHMSA), spills occur more frequently with pipelines than rail cars. In 2015, PHMSA received 252 reports of pipeline spills compared to 44 by rail. Even the year before, pipeline spills were 62 percent higher than spills by rail.

It’s worth noting that the type of oil being shipped can impact the risks from oil spills. For instance, the Keystone XL pipeline carries tar sands oil, which is a slurry of dense and viscous petroleum mixed with sand, clay and water. This material is more corrosive than higher quality oil, meaning that pipelines that carry it will corrode at a faster rate, raising the possibility of leaks.

The 2,147-mile Keystone Pipeline had three major spills between the time it began operations in 2010 and 2017, including a massive 5,000-barrel spill in 2017 and two 400-barrel spills in both 2016 and 2011. However, the pipeline’s spill risk assessment suggested that the chance of a leak of more than 50 barrels would be “not more than once every seven to 11 years over the entire length of the pipeline in the United States.”

By Rail

When transporting oil by train, oil is loaded onto tank cars carried by diesel trains that travel on railways across the country. Rail trails far behind pipelines as the second-most popular mode of transportation for oil, representing just 10 percent of oil transfer during its peak between 2010 and 2014. That said, the use of rail transport has increased in recent years, with the quantity jumping up from 16 million barrels shipped by rail in the U.S. in 2012 to 59 million in 2014. The number fell a bit to 48 million in 2017, but it’s possible that rail will remain a viable competitor to pipelines for oil transportation. 

(Image courtesy of Reuters.)
(Image courtesy of Reuters.)

Pros

While pipelines have fixed locations, rail transport can be more flexible for transporting oil and can deliver oil to and from a wider variety of locations on short notice, depending on market demand. Unlike pipelines, rail shipment does not necessarily require long-term contracts, nor is there a regulated rate of return. A pipeline, for instance, can’t raise its rates when service demand is high.

“A pipeline can get congested during peak times so you can’t get any more oil through it, but the rate still can’t increase above that maximum regulated rate,” University of Chicago public policy professor Ryan Kellogg told Energy News. “So, the fact that pipelines can become congested creates the opening for rail to come in and help move the extra oil.”

Cons

As noted earlier, shipping oil by rail costs about two to three times as much per barrel as pipeline delivery. Kellogg also pointed out that increased demand for rail shipment actually resulted in increased costs, due to the cost of logistics and renting out rail contracts.

If oil catches fire during a train derailment, it can catch on fire and lead to an explosion. (Image courtesy of Paul Chiasson / THE CANADIAN PRESS.)
If oil catches fire during a train derailment, it can catch on fire and lead to an explosion. (Image courtesy of Paul Chiasson / THE CANADIAN PRESS.)

Though spills from pipelines may be more frequent than those from rail cars, that does not mean that oil transport by train is without its environmental and health impacts. In addition to the risk of derailment and spilling, diesel emissions from oil trains are significant. Karen Clay, a professor of economics and public policy at Carnegie Mellon University, found that the environmental costs of greenhouse gasses (GHG) released by oil trains leaving North Dakota in 2014 were twice the cost of any train accidents.

According to Clay, the environmental and health costs of moving oil by rail are double the cost of transporting oil by pipeline. She also found that GHG costs from the power plants used to pump oil through pipelines is actually eight times higher than the cost of spills and accidents. While these power plants emit GHGs in remote areas, diesel trains pass through dense urban environments, including locations with minority and low-income communities, thus contributing to environmental justice issues.

It’s worth noting that some of these emissions could be curtailed through the deployment of electric locomotives and renewable energy plants, both of which have their own social and environmental costs.

Bottom Line

As it stands, the entirety of the global economic system is dependent on fossil fuels and any significant change in that energy source will have a major impact on the world’s financial structure and, therefore, society overall. Given the entrenched economic and political interests in maintaining that system, oil transport will remain until society is ready for such a transformation.

With that in mind, it is possible that pipelines and railroads will work in tandem to transport oil. Once up-front investment is established, pipelines are a low-cost method for moving oil from one location to another. Then, when the market changes, rail provides an alternative, more flexible method for transportation.

At the same time, regulations related to preventing oil spills, such as increased oversight from organizations such as the Environmental Protection Agency, can be deployed to provide advanced monitoring over both pipeline and rail transport of oil. The rapid deployment of renewable energy technologies and electrification of the U.S energy grid must also occur to bring GHG emissions down to zero. By the time that occurs, however, the actual shipment of oil will be made obsolete.


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