Oil Billionaire Says Rail Is An Effective, Flexible Alternative To Keystone XL

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"Oil Billionaire Says Rail Is An Effective, Flexible Alternative To Keystone XL"

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The chief executive of a major oil company says the U.S. no longer needs Keystone XL because the American oil that will be carried by the pipeline could be shipped by rail.

Harold Hamm, CEO of Continental Resources — a company that has committed to ship oil on Keystone XL — said the delay in decision-making on the pipeline and the “effective” and flexible option of shipping oil by rail has him doubting Keystone XL’s importance for the U.S. oil industry.

“Is it needed for the industry? I don’t think so … not in the U.S,” Hamm told Reuters. “It may be several years yet, you know, before you find out if it [Keystone XL] is going to be built. It’s no way to run your business.”

This isn’t the first time Hamm, who has made billions off the boom in Bakken oil production, has expressed his doubt about Keystone’s importance for the U.S. oil industry. In August, the oil billionaire said the pipeline was “not critical any longer” for transporting oil from the Bakken shale formation in North Dakota and Montana.

But it’s the first time Hamm has singled out rail in particular as the transportation alternative to Keystone XL. Continental now ships 90 percent of its oil by rail, and rail is surging as a transportation option for the rest of the oil market as oil production in the U.S. outpaces pipeline capacity. In 2012, U.S. railroads carried 234,000 car loads of crude oil, up from just 5,912 car loads in 2007. And last week, North Dakota’s Mineral Resources Department announced that up to 90 percent of the state’s crude would be shipped by rail in 2014, an amount that’s more than the capacity of Keystone XL.

But despite Hamm’s charactarization of rail as a flexible, effective way of shipping oil, events this year have shown that rail is just as dangerous a method of shipping oil as pipelines. In July, a train carrying crude oil from the U.S. derailed and exploded in the town of Lac-Mégantic, Quebec. The disaster killed 47 people, forced residents to abandon their homes and businesses and has required an ongoing clean-up and rebuilding effort that costs about $4 million per week. And just last month, a 90-car crude oil train derailed and exploded in Alabama, spilling oil and causing flames that shot 300 feet into the sky. The accident was dubbed by Reuters as one of the “most dramatic of its kind in the United States.”

The potential for disaster from shipping oil by rail and pipeline points to another option — keeping much of the planet’s remaining fossil fuels in the ground. In July, the International Energy Agency warned that two-thirds of proven reserves of fossil fuels should be left undeveloped if the world is to limit warming to 2 degrees Celsius.

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