Energy Economics Exchange: Shipping oil by rail: A modern-day problem of social cost

InsightaaS: Many longer-time readers are aware that in addition to the material published on this site, the team publishes in other venues — including as the Sustainable IT columnists for Bloomberg BNA. Where possible, we like to highlight sustainability-related blogs in our Sunday Across the Net features.

In this post, we find Meredith Fowlie, associate professor of agriculture and resource economics at University of California Berkeley, addressing a subject of particular interest to Canadians who have been following the Keystone pipeline debate, or who were affected by the tragedy at Lac Megantic – the rail transportation of crude oil. Fowlie’s treatment of the issue as “a modern-day problem of social cost” takes an academic view of a real-world problem, offering readers clear insight into the issues surrounding rapidly-increasing rail volumes of crude shipments, and concluding that “given current — and projected — volumes of oil moved by rail, a better understanding of how damages from rail transport of hazardous materials manifest could play a critical role in informing new policy solutions.”

While environmental groups and other stakeholders have been working hard to delay — if not derail- major pipeline projects like Keystone, oil companies have been working hard to find alternative ways to get their crude oil to market.

Rail transportation is viewed by some as a stop-gap measure because it is more costly per gallon-mile as compared to pipeline transport. But it is has some clear advantages. Trains can directly access virtually any market in North America.  Producers can more quickly shift where the oil is shipped.  In general, expanding rail transport capacity requires less regulatory oversight.

The graph below documents the striking increase in the number of oil-filled tank cars in recent years. To put these numbers in perspective, the percent of domestic crude oil production carried by rail has risen from approximately 1 percent in 2010 to 10 percent in 2013. In California, the Energy Commission is projecting that rail deliveries of crude oil could account for 25 percent of the state’s total by 2016…

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