CN expands rail holding, banking on increasing northern oil production
As the price of oil increases, the attractiveness of extracting oil from oil sands in Canada’s northern regions increases apace; CN acquires yet more rail to ensure rail links to Alberta’s oil sands region
True North strong and free. Here is one way to ensure energy independence: CN will acquire Alberta, Canada—based Athabasca Northern Railway (ANY) to preserve what it calls a critical rail link to the oil sands region of northern Alberta. CN’s purchase and rail-line rehabilitation plan are premised on long-term traffic volume guarantees that the Company has negotiated with shippers Suncor Energy, OPTI Canada, and Nexen. CN will pay C$25 million for the link and invest C$135 million in rail-line upgrades over three years to improve transit times and service consistency. “While ANY’s current traffic volumes are too low to keep it going as a stand-alone operation, we and our shipper partners see the ANY playing a critical role in one of the world’s largest construction projects — the oil sands reserves in northern Alberta are second only to Saudi Arabia’s, and industry is expected to invest more than C$100 billion over the next decade in oil sands development, construction and infrastructure upgrading,” said Hunter Harrison, CN president and chief executive officer
The 202-mile ANY connects with CN at Boyle, Alberta, located 101 miles north of Edmonton. CN’s plans for the line will preserve market access to existing and potential receivers along the rail corridor — today sulphur and petroleum coke move southbound on the ANY, and increased volumes of these commodities are expected to move over the line in future. CN’s line rehabilitation, including upgraded rail, ties, bridges and new ballast, will allow greater volumes of northbound shipments of construction materials and machinery to support oil sands development. Without the commitment and investments being made by Suncor, OPTI Canada, NEXEN, and CN, the rail line faced abandonment this month. The result would have been a significant increase in truck traffic on Highway 63, generating increased congestion and safety concerns on the busy road. Rail is also a much more efficient way to move freight traffic compared to truck, with significantly fewer Green House Gas (GHG) emissions.
ANY marks CN’s third short-line transaction in economically vibrant northern Alberta in the past two years. In January 2006 CN purchased the Mackenzie Northern (MKNR) Railway and Lakeland & Waterways Railway for C$26 million, and in December of that year it acquired the Savage Alberta Railway (SAR) for C$25 million. In 2006 and 2007, CN spent C$58 million to upgrade the rail infrastructure of the former MKNR and SAR and is planning C$22 million in further improvements in 2008.
