Understanding Government and Railroad Strategy for Crude Oil Transportation in North America by S. Joel Carlson Bachelor of Science in Civil Engineering, University of Alberta, 2006 Submitted to the Engineering Systems Division and the Department of Civil and Environmental Engineering in partial fulfillment of the requirements for the degrees of Master of Science in Engineering Systems and Master of Science in Transportation at the MASSACHUSETTS INSTITUTE OF TECHNOLOGY June 2014 © 2014 Massachusetts Institute of Technology. All rights reserved. Signature of Author . Engineering Systems Division Department of Civil and Environmental Engineering May 21, 2014 Certified by . Joseph M. Sussman JR East Professor of Civil and Environmental Engineering and Engineering Systems Thesis Supervisor Accepted by . Richard C. Larson Engineering Systems Division Chair, Education Committee Accepted by . Heidi M. Nepf Department of Civil and Environmental Engineering Chair, Departmental Committee for Graduate Students 2 Understanding Government and Railroad Strategy for Crude Oil Transportation in North America by S. Joel Carlson Submitted to the Engineering Systems Division and the Department of Civil and Environmental Engineering on May 21, 2014 in partial fulfillment of the requirements for the degrees of Master of Science in Engineering Systems and Master of Science in Transportation Abstract On July 6, 2013, an oil-laden unit train derailed and exploded in Lac-Mégantic, Quebec, Canada, killing 47 people, shocking and saddening many, and leading to significantly increased public scrutiny of crude oil transported by rail. Simultaneously, there has been intense scrutiny of proposed pipelines from the oil/tar sands in Alberta, most notably the TransCanada Keystone XL. Not only is there concern about the potential environmental impacts of the pipelines themselves, such as a potential spill of diluted bitumen, but there is also concern about the consequences of greenhouse gas emissions caused by the energy-intensiveness of bitumen production and refining. Proponents argue that a denial of pipeline permits by governments in Canada and the United States would lead to more crude by rail, an outcome that pipeline supporters believe would not only be less cost-effective, less safe, and less environmentally-friendly, but would also ultimately lead to the same amount of greenhouse gas being emitted from the production and refining of oil sands bitumen. Railroads, with much of the required infrastructure already in place to transport crude, usually do not need to undergo the same environmental assessments as pipelines for modest capacity expansions. As a result, when pipelines are evaluated through political and regulatory processes in Canada and the US, much of the focus is on what railroads might do if a pipeline permit is not approved, rather than what they should do. This research emphasizes the latter. The CLIOS Process, an approach for studying complex sociotechnical systems, is used to study the relationships between the oil sands production and transportation systems, the institutional actors that govern them, and the critical contemporary issues of economic development, energy security, climate change, and safety. Specifically, strategic alternatives – pipelines and railroads – for adding transportation capacity from the oil sands are identified and their performance along dimensions of societal concern are compared and contrasted. Additionally, recognizing that railroad safety is of particular concern, CAST, an accident investigation tool built on the STAMP accident causation model, is used to study the safety control structure of the Canadian railway industry that existed prior to the Lac-Mégantic accident. This research describes how environmental acceptability is implicit in advancing energy security and economic development. The research also raises questions about the acceptability of safety risks associated with rail transport of crude oil and recommends that this issue be further debated at railway management, regulatory, and political levels. Both railroad and pipeline modes are environmentally efficient and safe, and the emphasis of the conclusions is that further improving environmental performance and further improving safety should be focused on, whenever possible, not only by looking inwardly at one organization or transport mode in isolation, but also by seeking broader system-level changes. Thesis Supervisor: Joseph M. Sussman Title: JR East Professor of Civil and Environmental Engineering and Engineering Systems 3 4 Dedication To the memory of grandma Evelyn, who passed away during my time at MIT, as a reminder to: “always aim high” 5 6 Acknowledgements There are many individuals who have contributed to my success at MIT. I will be sure to thank you in person if you are not mentioned here. To Joe, thank you for your encouragement to take on this topic and for your personal and professional guidance during these past three years. We never did have a ‘normal’ year – if such a thing exists – but your steadfast support helped me press on even when I wasn’t sure about the path forward. To members of my research group and lab mates in 1-151 over the past three years, thank you for the guidance you’ve shared. In particular: To Ryan, Maite, and Naomi, thank you for never shying away from helping me brainstorm and for always asking helpful questions. I will miss our numerous blackboard and whiteboard sessions. To Andrés, thank you (especially) for the hard work and creativity you brought to our CLIOS project together. I don’t think I could have asked for a better “twin” during such a whirlwind first year at MIT! To Soshi, thank you your insights on system safety and the opportunity to work with you in ESD.863. Our work together on safety at the institutional level almost certainly started the thinking that led to my thesis research. To Iori, thank you for your thoughts on the CLIOS Process and your ideas for further extensions. Our discussions deepened my understanding of the Process and made me a better “CLIOSian.” To my brother, parents, and grandparents, aunts, and uncles, thank you for all the love and support that got me to MIT and kept me going over the past three years. To Pranai and Charlotte, thank you for being there for me like family. *** I would also like to gratefully acknowledge a Research Assistantship provided by NURail (National University Rail Center), a Schoettler Fellowship from MIT, and a Postgraduate Scholarship from the Natural Sciences and Engineering Research Council of Canada for financially supporting my research while at MIT. Joel Carlson Cambridge, Massachusetts May 21, 2014 Biographical note S. Joel Carlson holds a Bachelor of Science in Civil Engineering from the University of Alberta in Edmonton, Alberta, Canada. Upon his graduation in 2011, Joel was awarded the Governor General’s Silver Academic Medal and the Right Honourable CD Howe Memorial Fellowship, the university’s highest awards for graduating students. He was also a recipient of a Natural Sciences and Engineering Research Council of Canada Postgraduate Scholarship. Joel grew up in Prince Rupert, British Columbia, Canada where his family still resides. 7 8 Table of Contents 1 INTRODUCTION AND MOTIVATION ...................................................................................................... 17 1.1 THESIS PURPOSE ........................................................................................................................................................ 21 1.2 THESIS QUESTIONS AND APPROACHES .................................................................................................................. 23 1.2.1 Questions 1 and 2 ................................................................................................................................................... 26 1.2.2 Question 3 .................................................................................................................................................................. 29 1.3 RESEARCH CASES ....................................................................................................................................................... 32 1.4 CLOSING ....................................................................................................................................................................... 35 2 REPRESENTATION OF OIL SANDS PRODUCTION AND TRANSPORTATION SYSTEMS ......... 37 2.1 SYSTEM DEFINITION.................................................................................................................................................. 39 2.1.1 The Canadian (Alberta) Oil Sands .................................................................................................................. 39 2.1.2 The Oil Sands Transportation System .......................................................................................................... 51 2.1.3 Institutional Actors ............................................................................................................................................... 54 2.2 STRATEGIC ALTERNATIVES AND THE INFLUENCE OF ACTORS ........................................................................... 57 2.2.1 Strategic Alternatives Overview ..................................................................................................................... 57 2.2.2 Pipeline and Railroad Permitting and Regulations ..............................................................................