Promoters of a plan to connect the Alaska Railroad to the rest of the North American rail system say it could create new opportunities to exploit natural resources in the Far North and improve the lives of Canadians and Alaskans in remote inland locations.
Connecting the Alaska Railroad to the rest of the North American rail system could create new opportunities to exploit natural resources in the Far North, as well as improve the lives of Canadians and Alaskans in remote inland locations, according to supporters of the idea.
Two groups, the Alberta to Alaska Railway Development Corp. (A2A) and rival G7G Railway Corp., have put forth separate but similar proposals to build a railroad that would extend from the Athabasca oil sands near Fort McMurray, Alberta to Delta Junction, where the Alaska Railroad is already planning to connect its tracks from Eiletson Airforce base.
Their plans are, in a word, audacious.
John Falcetta, the president and chief executive officer of A2A, says the rail link would be over 1,500 miles long, by far the longest railroad built in North America in many decades, and cost an estimated $14 billion to $20 billion.
Bitumen, a heavy and extremely viscous form of petroleum, extracted from the Alberta oil sands would be an important cargo for the railroad. From Delta Junction, the trains could proceed to a port in Alaska, where the bitumen would be loaded into a tanker.
Alternatively, the bitumen could be transferred at Delta Junction or North Pole, Alaska, into the Alyeska Pipeline, also known as the Trans Atlantic Pipeline System (TAPS), which carries crude oil from Prudhoe Bay on the North Slope of Alaska to Valdez. Using TAPS, however, would require both the approval of Alyeska and upgrades to the pipeline.
But Falcetta notes that as a common carrier, the A2A would not be a “one-trick pony,” and bitumen would be one “among a plethora” of cargoes. The railroad could also be used to carry coal and other minerals along its route, move general freight into the interior of Canada and Alaska, or even to transport intermodal containers to and from the Port of Anchorage.
He said the railroad’s first task has been to engage with First Nations and Tribal Corporations, about 40 different groups of the Native Americans living along the proposed route that would have a significant ownership position in the company.
A Long Time Coming. According to a 2007 report on connecting the Alaska and Canadian railroads commissioned by the governments of Alaska and Yukon, “A railroad link from Alaska to the rest of the North American rail system has been under consideration since the Alaska Railroad was started in 1914. Today, a renewed interest in resource deposits in Alaska, Yukon, and British Columbia, as well as changing world markets, global trade dynamics and supply chains, has rekindled interest in the link.”
Walter Hickel, who was both the second and sixth governor of Alaska, was a strong proponent of the idea (as well as a proposal to build a railroad tunnel under the Bering Strait to connect Alaska with Russia).
From 2013 to 2015, the Van Horne Institute, a research group based in Calgary that focuses on transportation, trade and infrastructure and participated in the Alaska/Yukon study, conducted another study, this time evaluating a proposed rail link from the oil sands to Alaska for Alberta Energy, a provincial agency that promotes the development of local resources for the benefit of Alberta residents. Alberta Energy had been asked to fund the study by G7G and the engineering company AECOM.
Speaking at the Cargo Logistics Canada conference in Vancouver, British Columbia in February, Peter Wallis, a senior advisor to and former president and CEO of Van Horne, said “one of the key economic drivers for Canada is to find a solution to the problem of getting Canada’s petroleum products to world markets.”
He said the A2A “offers what I would call a partial solution, because the solution itself is going to require multiple manners of getting that product offshore, whether it be a pipeline or a railway.”
Falcetta, who formerly worked for AECOM, said the proposed railroad could move 1 million to 1.5 million barrels of bitumen daily, and according to an A2A presentation, this could be accomplished using eight loaded trains, each of which would use six distributed locomotives moving 192 cars carrying 630 barrels per car.
When cold, bitumen has the consistency of molasses, but Falcetta said when heated – as it is during extraction – it can be loaded into rail cars for transport across northern Alberta and British Columbia into Alaska, either directly to a port such as Port MacKenzie or to be transferred into TAPS.
Source: SHELL
Oil sands being loaded in a truck at the Athabasca Oil Sands. Bitumen extracted from the oil sands could be a major cargo on the proposed Alberta to Alaska railroad.
After loading, the bitumen would retain enough heat, even in the dead of winter, that additional heating would not be necessary to offload it once it reaches its destination, according to Falcetta.
Despite the massive scale of the project, Falcetta expressed confidence that the needed equity could be raised from investors from around the world. He did not identify the current investors underwriting the engineering, legal, and government and public affairs costs, but mentioned that two of them are investment bankers with close ties to First Nations.
He said it will take up to two and a half years to get the necessary permits and three to four years to build the railway, but that those processes could overlap to some degree.
He also noted there could be economic value in shorter segments of the railroad coming on line even as the remainder is completed. Nevertheless, he says the railroad is aiming at a “Day 1” completion date for the entire length of the railway some time in the first quarter of 2022.
Meanwhile, Matt Vickers, the chief executive officer of G7G, says his group is also continuing with plans to build the railroad, and is close to obtaining the necessary financing. Given the massive scale of the project, however, it seems likely only one group will be successful.
Pipeline Politics. At the same time these plans are proceeding, two stalled proposals for pipelines carrying bitumen have been given the green light, and another has been blocked.
A spokesman for Alberta Energy, which provided $1.8 million in funding for the Van Horne study at the request of G7G, an earlier proponent of the rail line and AECOM, said that at the time it funded the study, “there was not as much hope for pipelines to tidewater, to a coast.”
“It was a different political time,” he said, and the province wanted to look at alternatives.
However, he said Alberta Energy now believes pipelines are the safest and most efficient way to transport resources, and that increasing market access has been a big priority for the agency.
In November of last year, Canadian Prime Minister Justin Trudeau said the Government of Canada had approved the Kinder Morgan Trans Mountain Expansion Project that will “twin” a pipeline that has been in operation since 1953 and extends from Edmonton, Alberta, to Burnaby, British Columbia, near Vancouver. But the Trudeau government declined to authorize the Enbridge Northern Gateway project, which would have transported diluted bitumen from the oil sands to Kitimat, B.C.
Canada had also approved TransCanda’s Keystone XL pipeline, which would move 800,000 barrels of bitumen a day from Hardisty, Alberta, to Steele City, Neb., where it would connect with the existing Keystone pipeline for transport to U.S. Gulf Coast refineries, but the Obama administration had opposed it.
However, just days after being inaugurated, President Donald Trump revived the Keystone XL pipeline.
“The project will effectively triple our capacity to get Canadian energy resources to international markets beyond the United States,” Trudeau said of the TransCanada proposal.
Wallis was quick to point out that an Alberta to Alaska railroad may not be the only project that is needed to support energy exports from the area.
“What we’re saying is that given the amount of product that is available to be exported by Canada, this particular rail- way…has some significant opportunity to be a game changer,” he said.
The Alberta government’s response to the Van Horne study, however, was “somewhat underwhelming,” Wallis said. “Why? Well, because the government seems to be fixated on pipelines. They feel that pipelines are safer than rail.
“[But] when you look at the studies, that difference in safety between railways and pipelines is .00 as a percentage,” he said.
Climate Concerns. According to the Alberta Energy spokesman, Trudeau made his decision, in part, because the province’s “climate leadership plan,” an initiative to invest in renewable energy and efficiency, includes a levy on carbon emissions.
Mike Hudema, a climate and energy campaigner for Greenpeace Canada, said the environmental group is “equally op- posed to transporting tar sands by rail and by pipeline,” but added that it’s not just about the safety of the mode.
“Each method of transportation comes with its own dangers, and we know the dangers that come with transporting this stuff by rail. We have seen it in Lac-Mégantic and other communities across Canada and the U.S. that have experienced derailments of petrochemical products,” he said.
“But the bigger picture is that tar sands is a product that is a high-carbon resource in a world that is serious about climate change. I definitely would not be putting my money on trying to expand a resource that has no place in a climate-safe future.”
Researchers for Van Horne at the Institute of Northern Engineering at the University of Alaska Fairbanks and the Michigan Tech Research Institute and Railway Engineering Program in Ann Arbor created a formula to measure mineralization in the area around the proposed railroad using aerial surveys to get an idea of it’s total value.
“They have estimated for the purpose of this study that existing within 50 miles either side of the railway is a gross metal value of between $333 billion and $650 billion dollars over the 30-year existence of the rail link,” Wallis said.
Those minerals could be sent to Canadian companies or shipped offshore at Port MacKenzie, which is just two miles across the Knik Arm branch of Cook Inlet from the Port of Anchorage.
Teresa Watts of Shirocca Consulting, who also spoke at the Vancouver conference, said shipping times to and from Asia are two and half days shorter via Port MacKenzie than Port of Prince Rupert or Vancouver.
And cargo traveling from middle America to Port MacKenzie exclusively by rail would be 750 miles shorter and should take 150 hours or less, compared with existing rail-to-barge services via Seattle that take about 14 days, she said.
Short Lines, Big Digs. Watts, who noted Alaska has committed $400 million to construct a 30-mile extension between the existing Alaska Railroad and Port McKenzie, has been studying the potential of a shorter rail link from Delta Junction in Alaska to Fort Nelson, British Columbia, the northernmost point on the North American rail grid.
Though 500 miles shorter than the A2A proposal, it was estimated to cost $13 billion to $15 billion, based on the cost of the Port MacKenzie extension. However, that figure could potentially be reduced with further engineering, she said.
Watts’ recent work was aimed at updating that same 2007 railroad study funded by Yukon and Alaska. She noted that since the original report, there have been 10 more years of active exploration for minerals such as gold, copper, zinc and diamonds, as well as oil and gas.
Significant explorations include the Casino mine in the Yukon, which is one of the world’s largest copper mines, as well as the Selwyn, Wellgreen and Mactung projects.
“Initial reviews suggest that shippable annual mineral tonnage has increased to six times what was estimated in 2007,” she said. At the same time, commodity prices have climbed. In 2007, the price of copper was forecast at $0.50 to $1.00 per pound. Today, it’s $2.50 a pound.
According to Watts’ research, there are over 1,700 known metallic mineral occurrences within 50 miles of the railway segment running from Delta Junction to Fort Nelson. The combined mineral concentrates and solid fuel – like coal – could generate 43 million tons of freight per year.
And the mining industry would see a reduction in transportation costs compared to moving freight by truck and personnel by air, she said, as the current rail tariff for freight ranges from $0.06 to $0.10 per tonne mile versus $1.00 for trucking.
There would also be a reduction in capital and maintenance costs because many mines today are only reachable by very long gravel roads. The capital cost of a gravel road is $2.2 million per mile and annual maintenance costs amount to $40,250 per mile, according to Watts.
With lower transport costs, smaller and low-grade ore deposits could suddenly become viable commodities.
“There’s not much a mining company can do to change commodity prices on the world market, and even some of their operational costs are relatively fixed,” she said. “But if you can reduce the transportation cost, that is a significant reliever that they would have at their disposal.”
Railroads also have a smaller footprint than access roads, and “do not provide the same uncontrolled access, which allows anyone with their pickup truck and their hunting rifle to go into an area,” she added.
Watts said the rail line would also create opportunities for liquid natural gas shipments by rail from northeastern British Columbia at a reasonable cost, as one rail car can carry about 1,500 cubic meters of LNG compared with 40-50 cubic meters in a single tanker truck.
If the Alaska Railroad was ever extended to the north, it would also create opportunities to move natural gas south by rail. And since North Slope gas would be obtained by fracking, there would also be an opportunity to ship to drillers pipe, frac sand and other supplies.
Chris Dupin is Maritime and Intermodal Editor of American Shipper. He can be reached by email at cdupin@shippers.com.