A rail transportation system whose capacity is already being tested to the maximum could be facing demand from some new commodities in a couple of years.
With up to a half-dozen ethanol plants in various stages of development across the Prairies, combined with the prospect of biodiesel facilities being constructed, the railways may face new demand for rail cars.
Some recent news stories from the United States have suggested the rapidly growing ethanol industry there will put an additional squeeze on rail capacity and could translate into car shortages and high shipping rates for ethanol producers.
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“The dependence by producers and refiners on the railroad to move ethanol could pose a problem if the U.S. rail system becomes even more congested, especially around harvest time or due to other factors such as the weather,” said a story recently carried by Reuters News Agency. While gasoline can be transported in pipelines, there are problems moving ethanol that way because it absorbs water and impurities found in pipelines and so is usually moved in trucks or railcars.
The report noted that U.S. rail companies don’t expect any short-term problems and have been studying ways to streamline the movement of ethanol.
However, Canadian ethanol industry officials say they’re not anticipating any transportation-related problems because just about all of the ethanol to be produced in Western Canada in the immediate future will move by truck.
“I don’t see transportation as an issue,” said Gord Scraper, chair and chief executive officer of NorAmera BioEnergy Corp., which operates a 25 million litre annual capacity ethanol facility at Weyburn, Sask.
“In our case everything moves by truck and we don’t use the rail virtually at all.”
Product moves from Weyburn to terminals in Saskatoon and Regina or the refinery at Regina, and the company has had no problem securing trucks to do the job.
Scraper said rail doesn’t make sense for ethanol unless you’re shipping multiple rail cars, and the Weyburn plant doesn’t produce enough volume to do that.
Some of the U.S. plants that depend on rail produce as much as 800 million litres, which is greater than the entire Canadian industry.
Lionel Labelle, president of the Saskatchewan Ethanol Development Council, said transportation issues, whether truck or rail, won’t affect the development of the ethanol industry in Western Canada. The important thing is to get the plants built and then worry later about logistical issues like transportation.
“Our position is build it, and we’ll figure out these other details as we go forward,” said Labelle.
It will be at least a year or two before most of the new plants being talked about come on-stream so there is plenty of time to sort out issues like transportation infrastructure, he said, adding the bioenergy industry could stimulate an expansion in rail or trucking services.
Kory Teneycke, executive director of the Canadian Renewable Fuels Association, also dismissed concerns about transportation, adding he doesn’t think the news stories accurately reflected the situation in the U.S.
Canadian National Railways spokesperson Mark Hallman said that while it’s early in the game, the railway has been receiving a lot of inquiries related to the development of biodiesel, rather than ethanol.
He said the development of bioenergy presents a good business opportunity rather than a problem for the railways.
“We can see potentially some opportunity for the biodiesel, which would be sent by tank car to refining facilities in Eastern Canada.”
He added CN’s rail operations in the U.S. are not experiencing any problems meeting demand for ethanol movement.
