Report due in March on Canadian-Alaska oil railroad link

A preliminary feasibility study for a proposed1,600-mile rail link from British Columbia to Alaska will be completed in March, officials with G7G Railway Corp., a Vancouver, B.C-based company, told state legislators in Juneau Jan. 30.

G7G hopes to ship Alberta oil by rail from Fort McMurray, Alberta, to Delta for export through the Trans-Alaska Pipeline System and the Valdez Marine Terminal, said its president, Matt Vickers.

Eventually, as much as 1 million barrels per day could be shipped by rail and exported through Valdez, he said.

Alberta’s provincial government is interested in the idea and is funding the $1.8 million pre-feasibility study through the Van Horne Institute at the University of Calgary, Vickers said. AECOM Canada Ltd. has been contracted to do the pre-feasibility study, he said.

A key part of the G7G proposal is to include First Nation groups in Alberta, B.C., and Yukon Territory, as well as Alaska Native corporations, as partners.

Vickers, who is himself Tsimshian with family connections to Haida in Southeast Alaska, said Canadian First Nations are opposing a plan by Enbridge and Kinder Morgan to build pipelines to B.C. and export crude oil by tanker.

“We’re all opposed to supertankers operating off the B.C. coast,” Vickers said.

The rail plan to Alaska is being offered as an alternative.

Vickers said his company worked with scoping studies for an Alaska-Canada rail link that were sponsored by the state of Alaska and Yukon Territory that were done in 2006 and 2007. At that time the focus was on a railroad for exporting mineral ores from Alaska and Yukon and transporting general freight north.

The concept of moving oil by a rail route to Alaska builds on that idea, Vickers said.

Former Alaska Gov. Frank Murkowski, who initiated the Alaska-Yukon rail reconnaissance work while he was governor, said he still supports the idea.

“We were very interested in a rail link but the challenge was finding a way to pay for it. This idea, of shipping crude oil, may be the way to do that,” Murkowski said in an interview.

In an interview, Vickers said, “We were told by the Alberta government that they would be interested if we could a way to export oil for $10 per barrel or less. Our first scoping study indicated we might be able to do this for about $8.30 per barrel.” 

Based on that, Alberta approved the $1.8 million for the pre-feasibility study, he said.

Even if one of the pipelines to B.C. is approved and the Keystone XL pipeline goes ahead, G7G believes the growth of Canadian oil production will require more capacity in 10 to 15 years, and the big advantage of rail is that it can serve multiple customers.

An initial estimate is that a single-track line to Alaska could be built for about $12 billion and that a double-track line might cost $16 blllion, Vickers said. More refined estimates are in the pre-feasibility study due out in March.

If the pre-feasibility study shows the project to be possible, the next step is to raise several hundred million dollars to do a full-blown feasibility and engineering study.

“The key to any of these projects is getting the social license to build,” he said.

Kinder Morgan and Enbridge have failed to do that, and Vickers doesn’t think the federal government will trample over First Nations, forcing the issue.

Alaskans have meanwhile long been intrigued with the idea of a rail connection with the B.C. rail system. The state now owns and operates the Alaska Railroad Corp. connecting Southcentral with Interior Alaska, and is planning an extension of the railroad east to Delta, in eastern Alaska, to support military missile defense facilities that are built there.

Vickers said G7G’s conceptual studies show the cost of building and shipping crude by rail from Alberta to be about the same as by pipeline, and rail has the added advantage of being able to ship other bulk commodities from Alaska, particularly mineral ore. Passenger service could also be offered.

Vickers said some contacts have been made with North Slope producing companies who own TAPS but he also noted that as a common carrier the pipeline accepts oil offered by third parties for shipment, subject to penalties for any effects on quality.

TAPS owners, which include BP, ConocoPhillips and ExxonMobil, have said they are interested in shipping more liquids through the pipeline, which is now operating at about one-fourth of its design capacity.

However, on company has expressed concerns over the quality differences of oil from Alberta.

Trond Erik Johansen, ConocoPhillips’ Alaska president, said that if Alberta bitumen is to be shipped through TAPS it would have to be first refined and upgraded so as not degrade the value of North Slope crude now carried by the pipeline.

Alaska itself would be concerned with any changes in quality and sales value of crude oil since state revenues could be affected, said Kevin Banks, a commercial manager at the state Dept. of Natural Resources.

“Bitumen would have to be blended with lighter oil, and oil shipped north would have to meet TAPS specifications,” Banks said. “Also, payments would have to be made to the existing TAPS shippers to adjust for any qualify differentials. There are mechanisms in place to do this.”

11/15/2016 - 4:01pm