It’s being called a bet on the oilsands.

A proposed $2.6-billion intermodal transportation plan that would improve road and rail connections from the industrial region south of Edmonton to oilsands projects north of Fort McMurray is being touted as a sustainable answer to support future oilsands growth.

It is also on track to create one of the largest new North American railway projects, with 600 kilometres of rails as its goal. Of that amount, it’s estimated as much as 450 kilometres could be new tracks.

“It should happen,” said Jim Gray, chairman of the North East Alberta Transportation initiative (NEATCor), who doesn’t view the undertaking as a gamble. “But there’s a lot of interests to align.”

File photo by Chris Wood
NEATCor chairman Jim Gray doesn’t view Athabasca Oilsandsin

The veteran oilpatch executive sees this freight-driven solution as a way to help the province’s key economic engine grow even stronger.

“If we don’t do this, their (the Athabasca oilsands) business case will be somewhat impaired,” Gray said.

“An effective, efficient and complete infrastructure system will be a core element of a successful strategy if we are to attain the five million barrels per day potential of oilsands production by 2030,” he added.

The $2.5-million business verification report issued last week – jointly funded by the province of Alberta and the oilsands industry – says that the plan has substantial merit.

“The proposed new transportation infrastructure will result in significant reduction in travel times, transportation cost savings and improved travel safety for all users,” the NEATCor business verification study said.

According to the report, surface freight transportation trip time would be reduced more than 17 per cent.

It also says the savings in road-freight costs will be higher than $15 per tonne, while the cost reductions in future rail-freight charges over road- freight costs will be more than $41 per tonne. The saving for oversized-load rail costs over road-freight costs is estimated in excess of $147 per tonne.

The provincial government is being asked to chip in $300 million of the project’s costs.

Economic Development Minister Mark Norris said he must present the matter to his colleagues in the departments of Energy, Justice, Municipal Affairs, Sustainable Resource Development and Transportation before a decision can be made.

“The idea has a lot of merit,” said Norris. “We will move it along as fast as we humanly can.”

For Mike Glennon, executive director of the Athabasca Regional Issues Working Group, the report is encouraging.

“The devil is in the details,” said Glennon. “Our initial response to the report is positive. We’ll be looking at it over the next 30 days.”

The report calls for upgrading the existing highway from Nisku and Edmonton to Fort McMurray and beyond, along with the upgrade of current rail lines and the creation of new rail lines where necessary.

On the rail side, service from Nisku to Boyle would remain on existing lines. However, a final decision hasn’t been made on whether to utilize the current track system from Boyle north or to build a new line running parallel to Highway 63.

The project would be undertaken in six phases starting with immediate improvements to Highway 63 between Edmonton and Fort McMurray, while Phase 2 would comprise changes to the existing rail corridor between Nisku and Fort McMurray.

It is only in Phases 3 and 4 that new road and rail links would come into play for the oilsands region itself.

Phase 3 calls for a new road and rail bypass for Fort McMurray, with service to West Athabasca oilsands plants. Phase 4 would see new road and rail service to East Athabasca plants.

Phase 5 consists of the ongoing extension of new rail and roads to future oilsands and industrial developments. Phase 6, meanwhile, provides for the continuous operation and maintenance of the transportation system.

A tentative 31/2-year timeline sees construction beginning in 2005.

It’s expected that around 1,000 jobs will be created, many in the area of Fort McMurray and its adjacent northern communities.

Doug Faulkner, mayor of the Regional Municipality of Wood Buffalo, which encompasses Fort McMurray, is ecstatic over the plan.

“I am very excited about it,” said Faulkner. “I’m glad to hear that this could become a possibility. The announcement is good news.”

“Highway 63 is a real safety concern with amount of traffic on weekends and also with the large number of wide loads that travel on it,” said Faulkner. “It is in need of repair.

“This railway will address the heavy truck traffic and wide-load truck traffic and it will get the dangerous goods and chemical trucks away from Fort McMurray’s downtown core – through a highway bypass. That is positive.”

The mayor is also quite confident that the business case verification report will not gather dust on a desk, due to industry support and earlier positive indications from the province before its release.

Positive support is also what Gray hopes to find within the next two months as he moves to get stakeholders onside.

“Without this comprehensive solution we will fall back upon one-at-a-time strategies, expanding a section of road here and building a new bridge there; a process that rarely produces optimal results,” Gray wrote in a letter to stakeholders that is part of the report.


FUNDING HINGES ON BOND ISSUE

At a total cost of $2.6 billion, the proposed oilsands transportation plan is comprised of $2.3 billion in long-term debt raised in capital markets and a $300-million investment from the province of Alberta.

A non-profit corporation similar to NavCan, the entity that operates Canada’s air navigation system, would be formed to finance, build, operate and maintain the integrated transportation network.

The provincial government would continue to own the public infrastructure.

It is envisioned that funding would come mainly from bond issues.

Freight users would pay tariffs on their loads. The money would go to retiring the project’s debt. It is estimated it will take 30 to 45 years to pay down the debt.

If the project gets the green light, oversized loads would no longer travel on roads to reach the oilsands. Instead, they would use the new rail operation. A bypass road would eliminate the need for truckers to drive hazardous loads through Fort McMurray’s downtown core.

The new railway would not be owned by a single operator, such as CN.

Instead, it will be run on an open-bid contract basis where one contractor would haul railcars from a variety of companies.

The project leader is Calgary’s Paul Giannelia, one of Canada’s top infrastructure specialists whose work includes the Confederation Bridge that links the provinces of Prince Edward Island and New Brunswick as part of the Trans Canada Highway Network.