A fourth major accident in the past seven months involving crude oil shipped by rail (this one on Jan. 8 in New Brunswick) has added further urgency – as if any more was needed – to the discussion of shipping Alberta’s primary product.

Rail, pipelines, ocean tankers – all are being dissected for the pros and cons of transporting oil. How safe? How cost-effective? How environmentally friendly?

More specific issues arise on particular routes. What kind of infrastructure exists on chosen corridors? What regulations are being enforced? Who’s willing to pay how much for the oil being shipped (and that includes the ultimate consumers of much of the product: you and me)?

Then there’s what may be the single most challenging issue facing Alberta’s oil and gas industry – First Nations rights. First Nations opposition to Enbridge Inc.’s Northern Gateway pipeline in B.C. is well known.

Less well known are the numerous legal challenges by First Nations arising over oil and gas development in Alberta.

Ottawa and Edmonton have rewritten the book on resources development in recent years, and much of that rewrite arguably infringes on constitutionally guaranteed First Nations rights. Even the Fort Mackay First Nation – long an example of co-operative engagement between industry and a First Nations community – is fed up and has taken to litigation.

The courts have been an important tool in the protection of First Nations rights. But, in litigation, there is little room for give and take. Resentment swells in the absence of compromise.

Unless governments engage meaningfully with First Nations communities, we can expect many projects to be held up by these issues.

When it comes to cost alone, pipelines usually win; but cost is not the only consideration. Shipping crude by rail has its distinct advantages, including the relatively low capital costs of developing loading facilities, flexible routing and the ability to increase or contract volumes quickly.

In some cases, there’s no choice: the crude coming out of North Dakota’s Bakken fields needs rail because of the lack of pipelines in the area. Indeed, Bakken has boosted rail shipments of crude from zero five years ago to 700,000 barrels a day, and rail will continue to be needed for other new oilfields until pipelines to them are built.

But of the million barrels a day now being shipped by rail in North America, only a small fraction – around 50,000 barrels – consists of the heavy crude produced in the oilsands. The rest is light crude.

That’s important because Alberta’s bitumen is viscous, and even to get it into a tank car requires that it be heated or diluted. In addition, there’s a real shortage of tank cars right now, and most of them are ill suited to shipping heavy crude.

On top of these hurdles, a new round of safety regulations is expected, including a redesign of the DOT-111 cars that dominate North American fleets.

The reality is that rail will be of limited use for Alberta’s oilsands product. It needs pipelines.

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