Crude exports to Asia proposed by rail
Adam Waterous, chair of Strathcona Resources, is putting forward a colossal crude transport initiative to Asia via rail through northern British Columbia. This endeavor would transport an extra 250,000 barrels daily of Canadian oil to the West Coast within less than two years, at a much lower expense than constructing a fresh pipeline.
To proceed, Waterous requires Ottawa to exempt the undertaking from the federal oil tanker prohibition along British Columbia’s northern coastline. This restriction bars vessels carrying substantial crude oil quantities from unloading or loading at coastal ports.
Proposed Crude-by-Rail Export Terminal
Waterous intends to establish a privately capital-financed crude-by-rail export facility at Prince Rupert, B.C., which will dispatch the additional crude toward Asian markets. The plan will use the current CN Rail corridor to the Port of Prince Rupert, Canada’s third busiest maritime hub.
Strathcona controls two rail terminals in Western Canada and manages between 75,000 to 80,000 barrels daily by rail, accounting for about 80 to 90 per cent of the nation’s rail shipments. They assert CN’s rail network can accommodate the added volumes.
The proposal remains nascent, with Strathcona not yet filing it with authorities for regulatory clearance. However, the firm has consulted with commercial partners, including CN, to assess potential capital and operational expenses.
Waterous envisions Ottawa granting equivalent treatment to rail-shipped crude as it has for oil transported via pipeline. The federal administration’s readiness to ease the tanker ban will be a critical barrier for the project.
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Challenges and Precedents
The tanker ban constitutes the primary obstacle. Yet, Ottawa’s November agreement with Alberta remained open to softening the ban to enable a new bitumen pipeline, contingent on federal approval and Indigenous ownership opportunities.
There is precedent for Strathcona’s proposal, as CN Rail and Nexen previously contemplated a project more than twice the size to ship Alberta bitumen by rail to the terminal. Waterous said the decision to route the proposed Pacific Link pipeline through southern B.C. created an “obvious” opportunity for crude-by-rail exports through Prince Rupert.
Waterous believes his plan aligns with the Liberal administration’s primary objectives, such as its goal to double Canada’s non-U.S. exports and lessen reliance on the United States. He contends his crude-by-rail plan offers two benefits over the proposed Pacific Link pipeline: affordability and speed.
The project would be entirely privately funded, and Waterous believes it could get the project in service in under two years. This would help narrow the price discount on Western Canadian heavy crude, which has widened in recent weeks, by providing additional export capacity several years before Pacific Link is expected to enter service.
Waterous said the Canadian oilpatch is continuing to press Ottawa to amend or eliminate the oil tanker ban, with companies like Cenovus Energy and the Canadian Association of Energy Contractors calling for changes to the restrictions introduced by former prime minister Justin Trudeau in 2019.
Transport Canada spokesperson Flavio Nienow said the department’s role is to “implement and enforce” existing law, and noted the tanker ban remains in effect. The Prime Minister’s Office declined to comment directly and referred questions to the Privy Council Office.
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Strathcona moved into the oil-by-rail business in 2022 with its acquisition of Serafina Energy, which included the Hamlin Rail Terminal in Saskatchewan.
Waterous, a former investment banker turned oil tycoon, is best known for building Strathcona into one of Canada’s largest oil producers in less than a decade through a string of aggressive acquisitions. The company’s proposal for Prince Rupert is the latest development in its efforts to expand its oil-by-rail business.
He said Alberta’s referendum campaign on separation had created uncertainty and distraction for the government, but now that it’s over, he can start focusing on new projects, including the crude-by-rail export terminal at Prince Rupert, which would be built on a 100-acre site.
The project would require the construction of a new marine export terminal, similar to the existing propane export facility operated by AltaGas. Waterous believes that the infrastructure already exists with CN Rail, and the only thing that needs to be built is an oil terminal offtake in Prince Rupert.
Project Details and Timeline
Strathcona expanded its rail operations last year by acquiring the much larger Hardisty Rail Terminal in Alberta, a 260,000-barrel-a-day facility next door to Western Canada’s largest crude oil storage and pipeline hub.
