The train that got loose and crashed into a Quebec forestry town was transporting crude oil from North Dakota's Bakken field to a refinery in New Brunswick, Canada.
Energy pipeline proponents will try to use the disaster--the death toll is still rising as many people are unaccounted for and presumed to have been killed in the huge explosion caused by the derailment--to argue against train transportation of crude oil. But pipelines are costly and controversial; and long-distance truck transportation of crude oil is clearly uneconomical. So use of so-called unit trains--40 or more tanker cars hauled by an engine--will increase in the coming years. (Not for nothing did Warren Buffett buy a railroad.)
Decades of downgrading and neglect of America's rail infrastructure, however, have made freight terminals, in general, and rail-served fuel terminals, in particular, much more scarce. These assets are likely to rise in value as the country's energy landscape continues to shift rapidly, radically altering the ways in which domestically produced fuels are produced, processed, and distributed.
In the meantime, the deadly, mysterious crash--crude oil, though toxic, doesn't typically explode--will be cited by anti-oil activists as more proof that the fossil fuel on which the world still depends is dangerous, regardless of how it is transported. For them, the issue isn't pipelines or rail, or ocean freight, for that matter; rather, the issue is reducing dependence on oil, even if the supplies are produced at home or imported from a friendly nation, including a most friendly neighbor and ally--Canada.
Much is at stake: Oil by rail represents a small but important new source of revenue for big operators like Canadian Pacific Railway Ltd and Warren Buffett's BNSF, which have suffered a drop in coal cargo. It is also a flexible and cheaper option to more expensive European or African crude for refiners like Irving Oil, which confirmed on Sunday that the train was destined for its 300,000 bpd plant in Saint John, New Brunswick.
And for producers like Continental Resources Inc which have pioneered the development of the Bakken fields in North Dakota, railways now carry three-quarters of their production; new pipelines that can accommodate more oil are years away.
Saturday's train wreck may also play into the rancorous debate over the $5.3 billion Keystone XL pipeline from Canada to the U.S. Midwest, which is hinging on President Barack Obama's decision later this year.