CP, KCS now shipping heavy Canadian crude to Gulf Coast

Bitumen-by-rail project organizers eye terminal expansions in Alberta and Texas

The bitumen-by-rail project to produce and transport a type of heavy Canadian crude oil to the U.S. Gulf Coast is now fully operational, according to project organizers US Development Group (USD) and Gibson Energy.

USD and Gibson partnered to create a diluent recovery unit (DRU) to produce bitumen, a crude oil that has been altered in such a way that it can be categorized as a nonhazardous material for transport, per U.S. and Canadian regulatory standards.

The Hardisty Energy Terminal near Hardisty, Alberta, produces the bitumen, which the companies have named “DRUbit.” The terminal, which has a capacity of 50,000 barrels per day, is a 50-50 joint venture between USD and Gibson. 

After DRUbit is produced, the product is transported via railcars operated by Canadian Pacific (NYSE: CP). Kansas City Southern (NYSE: KSU) then receives the product in the U.S. and ships it to its final destination, the USD-owned and -operated Port Arthur Terminal in Texas. At Port Arthur, ConocoPhillips takes possession of the DRUbit.

The product’s transportation is competitive with transporting Canadian heavy crude to the U.S. Gulf Coast via pipelines, according to USD and Gibson. Both companies also say they are pursuing producer and refiner customers to secure additional long-term agreements to support further terminal expansions at both Hardisty and Port Arthur.

“Our DRU separation technology and DRUbit by Rail network create a first-of-its-kind infrastructure to move heavy Canadian crude throughout North America in a way that is safe, environmentally beneficial and economically advantaged to current pipeline alternatives,” said USD CEO Dan Borgen in a statement. “The project stands to strengthen communities with long-term, high-quality jobs along the current and future rail routes. We are thrilled to work with ConocoPhillips Canada, Gibson, CP and KCS to deliver this industry solution that we believe will positively impact our existing and future producer and refiner customers.”

Said KCS President and CEO Pat Ottensmeyer, moving DRUbit via rail is “a great opportunity to grow our business in the Gulf Coast area and further develop our strategic presence in the Port Arthur market.”

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Joanna Marsh

Joanna is a Washington, DC-based writer covering the freight railroad industry. She has worked for Argus Media as a contributing reporter for Argus Rail Business and as a market reporter for Argus Coal Daily.