osr 092014ts randy meyer
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OILSANDSRE VIE W.COM :: THE HE AV Y OIL AUTHORIT Y : : SEPTEMBER 2014 : : $10AV Y Y OIOIOIOIOIOIOIOIOIOIOIOIOIOIOIOIOIOIOIOIOIOIOIOIOIOIOIOIOIOIOIOIOIOIOIOIOIOIOIOIOIOIOIOIOIOIOIOIOIOIOIOIOIOIOIOIOIOIOIOIOIOIOIOIOIOIL L L L L L L AUAUAUAUAUAUAUAUAUAUTHTHTHTHTHTHTHTHTHTHTHTHTHTHTHTHTHTHTHTHTHTHTHTHTHTHTHTHTHTHTHTHTHTHTHTHTHTHTHTHTHTHTHTHTHTHTHTHTHTHTHTHTHTHORORORORORORORORORORORORORORORORORORORORORORORORORORORORORORORORORORITITITITITITITITITITITITITITITITITITITIT Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y : :: :: :: :: :: :: :: :: :: :: :: :: :: :: :: :: :: :: :: :: :: :: :: :: :: :: :: : SESEPT
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Fort Hills: Last chance to show mining projects are economic?
It’s getting hot in here: Near-term oilsands resources forecast
ExxonMobil’s $1-billion European present to Canada
The birthplace of SAGD is
forever entombed, but its most
important piece is raised from
the earth for posterity
GOODBYE UTF
COVER FEATURE
GOODBYE UTF
The birthplace of SAGD
is forever entombed,
but its most important
piece is raised from the
earth for posterity
By Deborah Jaremko
ON THE COVER: The 109-foot-tall steel headframe
of the Underground Test Facility
(UTF), which has now been
permanently decommissioned and
sealed with concrete. The work
done at the UTF formed today’s
SAGD-focused oilsands sector.
PHOTO: ROBERT OBER & ASSOCIATES INC.
14
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Please share & recycle
this fine magazine.
73 STATISTICS Taking a close look at the inputs to
and outputs of the oilsands industry
OILSANDS DATA
63 PROJECT STATUS The comprehensive listing of Canada’s
oilsands developments
COLUMNS
78 TRANSITION
Risky climate policy
Why governments do the energy
sector no favours with status
quo approach to climate policy
By Amin Asadollahi
FEATURES
43 AMBITIOUS GOALS Fort Hills could be the industry’s last, best shot to prove new oilsands mining
projects are economically viable. Now it’s all up to project execution.
By Joseph Caouette
49 RESOURCES FORECAST 2014 Higher prices and narrowing differentials drive continued growth while
pressure builds on development costs
By Martin Silbernagel and Joseph Caouette
59 SAFE TRAVELS: RE-AFFIRMING THE PLEDGE The Coalition for a Safer 63 & 881 sets out a new wave of opportunity to
spread commitment to highway safety
By Melanie Collison
FACES OF THE OILSANDS 2014
Extra coverage only on
our website.
Look for special coverage tagged with this logo:
| 8 IN REVIEW | 13 EYES ON THE OILSANDS | 81 UPCOMING EVENTS | 82 SECTOR WATCH
25 STEVE WILLIAMSPresident and chief executive officer,
Suncor Energy Inc.
29 WAYNE PRINSPrairies director, Christian Labour
Association of Canada
33 LEO DE BEVERChief executive officer, Alberta
Investment Management Corporation
37 ANITA SPENCEQuest project manager, Shell Canada
Limited
41 RANDY MEYERVice-president, business development
and logistics, Altex Energy Ltd.
SEPTEMBER 2014 | OILSANDSREVIEW.COM 5
contentsVOLUME 9 | NUMBER 9 | SEPTEMBER 2014
Rail guy from the beginningRandy Meyer is pleased to have been proven right about
crude by rail
By Melanie Collison
Randy Meyer used to get laughed out of the room when he talked about the
benefits of crude by rail. But today, thanks first to the momentum brought by
pipeline constraints and then to the recognition of sound economics, the practice
is widespread and expanding. Meyer—one of the original pioneers of crude by
rail—is happy to have been proven right.
RANDYMEYER
VP, business development
and logistics, Altex
Energy Ltd.
PH
OTO
: TO
DD
KO
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FACES OF THE O IL SANDS 2 014
SEPTEMBER 2014 | OILSANDSREVIEW.COM 41
It was a discouraging 14 months until he got the National Post ’s
Diane Francis interested.
The guest speaker at a CN sales meeting, Francis was la-
menting the lack of a pipeline to the West Coast. “I told her we
do have a pipeline—called rail,” Meyer says. She wrote columns
touting the economics of rail and its ability to decouple Canadian
oil prices from American control.
“That’s what broke the ice jam; people started to realize we
had something.”
That “something” is growing quickly. Crude by rail offloading
capacity from western Canada was essentially zero in 2011.
According to the most recent analysis by Peters & Co. Limited,
capacity has risen past 500,000 barrels per day and is expected
to exceed one million barrels per day by the end of the year.
In North Dakota, producers are already transporting nearly one
million barrels of crude per day by rail—up from essentially noth-
ing in 2010.
In 2012, Meyer left CN for Altex, where he’s responsible for
sales and marketing, the development of crude oil rail loading and
unloading terminals in Canada and the United States, and the
logistics systems to manage them.
As the rail guy who was there from the beginning, scoping the
opportunity with the Alliance Pipeline founders, Meyer is gratified
that crude by rail is now widely accepted. “Before us nobody was
even talking about it,” he says.
Still, he grapples with frustration because some media and
politicians perpetuate myths and misstate facts.
“The media and government are in love with pipelines. It’s wrong
for government to promote one industry over another,” he says.
In the end, he is sure the future will be bright for crude by rail
because “pipe capacity goes way up [for light oil] if you take out
the heavy oil blocking it.”
In 2008, as business development lead for Canadian National
Railway Company (CN), he was working crude by rail in corpor-
ate boardrooms across the heavy oil sector. His main message:
oil companies were seriously underestimating the diluent penalty
blended into the cost of pipelining crude.
“People did not understand the economics or capabilities of
rail,” says Meyer. “We hit a brick wall. People were entrenched.
CN was getting impatient.”
Meyer had a long history of opening doors at CN. In the 1970s,
he put himself through school working for the company. When he
signed on full-time, he was promoted into information technology
then moved into market analysis and sales.
Recognized as being entrepreneurial, he became the archi-
tect of CN’s long-term business development strategy in western
Canada, which primarily related to the petroleum industry.
Meyer’s original plans hinged on opportunities relating to the
multiple new bitumen upgrading facilities planned for Alberta’s
Industrial Heartland.
But one by one, the tenants of upgrader alley toppled, so he
turned in a new direction: crude by rail.
In retrospect, it seems obvious. Crude by rail operations are
bringing millions of dollars per year in new business to CN and
other operators, and the practice is growing strongly, but it had a
slow start.
“In November 2007, the guys from Altex Energy Ltd. ap-
proached me at CN,” Meyer explains. “They were the people who
built the Alliance Pipeline—the original Keystone idea. They pro-
posed a pipe that eliminated the diluent penalty, but they needed
parties with pure bitumen to ship. Their idea was to use rail as a
bridging mechanism until they got the pipe built.
“We realized rail was cheaper than even this pipeline. I started
trying to convince CN, but everybody thought I was crazy.”
“The media and government are in love with
pipelines. It’s wrong for government to promote one
industry over another.”
42 OILSANDS REVIEW | SEPTEMBER 2014
FACES OF THE O IL SANDS 2 014
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