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STP’s transportation bill will be a whopping $31 per barrel, according to company estimates, but it will still manage higher netbacks — or revenue minus total cost per unit — of an additional $18 compared to pipelines as it will fetch Brent prices. The company will also save on diluents as, unlike pipelines, heavy oil transported on railways does not need to be blended with condensate. It typically costs $8 to transport a barrel of oil by pipeline.

STP’s long, multi-transport haul highlights the industry’s desperation to access the market in the face of severe environmental, political and aboroginal opposition to new pipeline proposals at a time when Western Canadian oil production is soaring.

Mr. Bolinger say there will be differential pressures for at least the next couple of years to make rail economical for the company. Brent was trading Thursday at US$114.62 per barrel, compared to WTI’s US$96.01 and Western Canada Select’s US$82.89, highlighting the disconnect between the various benchmarks.

“The reason why the rail market exists for crude oil is not that rail is cheaper than pipeline — it’s because of the spread in the crude market between Brent-based pricing and WTI pricing,” says Mark Hallman, a CN spokesman. “For light crudes, rail helps producers access markets that are not pipeline-connected and provides them with waterborne (Brent) netbacks.”

But Mr. Bolinger says the company may continue to look favourably on rail even if the proposed pipelines see the light of day. “It may be part of our long-term strategy, however, we will continue to evaluate this on an ongoing basis.”