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Farmers concerned over rail demand following Keystone XL cancellation

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Farmers are concerned about higher long-term rail volumes following the cancellation of the Keystone XL Pipeline. Jackie Wilson reports – Jan 23, 2021

The ripple effects of US President Joe Biden’s decision to cancel the Keystone XL pipeline aren’t just being felt in the energy sector, farmers are keeping a watchful eye on how it’ll affect rail demand long-term.

“If the cancellation of the Keystone XL pipeline inevitably results in more oil-by-rail shipments, that creates a question of capacity and obviously we’re concerned about having sufficient takeaway capacity to get our commodities to market,” United Farmers of Alberta president Scott Bolton said.

Read more: Town of Hardisty, Alta., where Keystone XL begins, prepares for ‘tough year’ after Biden kybosh

The US project green-lighted by the Trump administration was designed to carry 830,000 barrels of crude oil a day from Alberta to Nebraska.

Without it, Canada’s rail resources will have added demand.

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“Most of the oil rail goes north-south, heading towards the Gulf Coast…where as most of the grain trains head east-west. There’s less worry about congestion on rail lines and more competition for crews and resources,” Richard Masson, U of C. School of Public Policy Executive Fellow, said.

Read more: Alberta premier calls for compensation amid cancellation of Keystone XL

Canadian Pacific and Canadian National Railways are reporting record levels of gain shipments and both are adding higher capacity grain hopper cars to their fleets.

“Alberta saw a record crop yield this year with an eight per cent increase over the 10-year average. Wheat exports alone grew by nearly 30 per cent in 2020, which just goes to show how important railway capacity is for Alberta farmers,” Alberta’s Minister of Agriculture and Forestry Devin Dreeshen said in a statement.

“Just as grain should be on trains, oil should be in pipelines,” Dreeshen added.

The consistency of agriculture products compared to oil is working in favour of farmers, according to Masson.

Read more: Canada didn’t start Keystone XL dispute — the president did, Kenney says in rebuke of Biden

“Oil has been on and off again, and so it’s harder for the railways to make money on oil. At least in the last few years. Whereas grain, you know it’s coming every year,” Masson said.

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“It’s very consistent and so the rail lines have spent a lot of money trying to improve their capacity to handle grain,” he added.