Playing The Lesser Of Two Oil & Gas “Evils”

Todays top stocks to buyThough hated on more by environmentalists, the debate over fuel transport could once again lean towards pipelines thanks to a recent string of mishaps on rail…

5 major accidents in 7 months.

That’s the latest track record of trains hauling crude oil in North America (no pun intended).

The most recent incident happened on January 7th when a Canadian National Railway train carrying oil and propane derailed and caught fire near the town of Plaster Rock, New Brunswick. No deaths or injuries were reported, but CN announced that 17 railcars of the 122-unit train went off the tracks.

On December 30th, a 106-tanker train carrying Bakken oil collided with a train carrying soybeans near Fargo, ND. Rail operator BNSF reported that 20 railcars caught fire, with each tanker carrying roughly 25,000 – 30,000 gallons.

On November 8th, a 90-car train owned by Genesee & Wyoming Inc. derailed in Aliceville, Alabama, sending 25 railcars off the tracks with several tankers bursting into flames.

On October 19th, another fuel-carrying CN train jumped the tracks near tiny Gainford, Alberta. 13 of the derailed cars contained liquefied petroleum gas, and authorities needed to conduct a controlled burn for six of the units in order to properly clean up the damage.

But the most serious accident in the last 7 months happened on July 6th in Lac-Megantic, Quebec when a Montreal, Maine & Atlantic Railway (MMA) train carrying 72 tanks of crude derailed and ignited. Explosions ripped through the small town located near the Maine border, leveling buildings and killing 47 people.

Things aren’t looking too good for the rail industry at the moment.

It can be debated that this recent spate of accidents isn’t an accurate representation of trains becoming a more dangerous method of transporting fuel.

After all, according to the International Energy Agency (IEA), North American pipelines spill three times as much crude as trains over comparative distances traveled.

However, the number of trains carrying oil and gas are rising exponentially.

Just 4 years ago, there were a little more than 10,000 railcars moving fuel in the US. In 2013 that figure has risen to 400,000.

The IEA further states that despite pipeline accidents spilling out more fuel, the risk of a train spill happening is six times greater than that of pipelines.

So essentially, an increasing amount of fuel being transported by train could lead to more derailments and potentially higher volumes of fuel being spilled.

In Canada, it appears that the trend is already happening.

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The Canadian Railway Association reports that the number of railcars moving oil across Canada skyrocketed from 500 to 140,000 between 2009 and 2013.

The amount of fuel spilled by trains is also six-times higher than pipelines according to Canada’s National Energy Board.

Old Pipelines are to Blame

The risk in pipeline-related spills has a lot to do with outdated technology that was used to build them.

Out of the 182,500 miles of liquid fuel pipelines snaking throughout the US, more than a quarter of them were built prior to 1970 with what was called low-frequency, electric-resistance welded pipe.

Metal sheets were bent to form a tube then the edges were heated with a low-frequency electric current to weld them lengthwise.

Such welds were known to leave defects in seams that made them susceptible to corrosion and cracks, as was the case with both the Exxon Mobil spill in Arkansas and the Chevron spill in Utah last Spring (I talk more about this in an article here).

All this points to a strengthening argument to get new pipeline projects like TransCanada Corp’s (NYSE:TRP) Keystone XL and Enbridge’s (NYSE:ENB) Northern Gateway approved to replace an ever-aging and vulnerable infrastructure.

While I’m not saying that we should do away with railcars (quite the opposite in fact, since we need to offer more ways to bring fuel to consumers), lawmakers and conservationists shouldn’t view pipelines as high-risk alternatives to trains – especially since accidents in the past were linked to obsolete technology.

Of course, any new technology won’t be fool proof and all risks should be considered…

But doing nothing about a fuel transport system that’s well past its expiry date is far more dangerous.

Yours in profits,
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John Holt
for Top Stock Millionaire
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