With mounting scrutiny over proposed oil export pipelines from Alberta which are taking years to get regulatory approvals, producers are increasingly looking to rail to move growing crude production.

Question is — is this a long-term or temporary solution?

Dick Gusella, CEO of Calgary-based oilsands producer Connacher Oil and Gas Ltd., told the Herald this week that he’s ramping up his company’s commitments to ship by rail. Even when new export pipelines come online and Connacher boosts production enough to commit bitumen volumes through pipe, the smaller oilsands player will also keep trucking and moving crude by rail.

“We’re going to control, by end of next year, 290 rail cars. That will allow us to deliver about 2,500 barrels per day of production by rail,” Gusella said, noting Connacher is already leasing 90 rail cars to ship crude from Alberta to the United States.

Gusella said Connacher won’t wait to find out if an oil pipeline gets built to the West Coast or U.S. Gulf Coast. “We’re the little guy. We’ve got to get out there and be nimble.”

On Thursday, TransCanada Corp. said it had received enough shipper support to move ahead with an extension and expansion of its proposed 2,700-kilometre Keystone XL pipeline from Alberta to the U.S. Gulf Coast, adding an 80-kilometre leg into Houston, of the line that would end in Nederland, Texas. Thing is, Keystone XL, including the Houston lateral, isn’t scheduled to start operating until the end of 2014, due to regulatory delays announced recently.

Enbridge Inc.’s Northern Gateway pipeline proposed to bring Alberta crude to Canada’s West Coast in British Columbia is also facing a regulatory slowdown — the Joint Review Panel examining the project now expects to make its recommendation to Ottawa a year later, near the end of 2013.

While pipeline builders move forward at a snail’s pace — as fast as they can — rail companies are moving in. In some cases, they just need to add an oil terminal at either end of a line and they’re good to start transporting crude.

What’s likely is that while pipe will remain the No. 1 preference for transportation of crude, rail companies will etch out a permanent niche serving certain markets. Challenges remain though: rail operators are likely to disrupt communities along their routes if they start hauling massive volumes of oil by rail and there are questions about efficiencies and cost.

Is the safety of transporting by rail the same as via pipeline? Canada’s environment commissioner noted in a report to Parliament this week on the transportation of hazardous goods that incidents can occur on any mode of transportation, citing a March 2011 train derailment in Port Hope, Ont., where spilled propane, aviation fuel and sulphuric acid caught on fire.

The U.S. State Department reviewing Keystone XL said in its review of alternatives that rail isn’t an option in that case, noting that there’s currently no rail link between Montana and the Texas Gulf Coast refining market — the largest in the world.

According to the State Department (under Draft Environmental Impact Statement, 4.0 — Alternatives): “Should such a train-dependent alternative system be developed, crude oil would move south into the PADD III area by rail. To provide the potential capacity for oil delivery consistent with the Project’s purpose and need, this system would require approximately 40 unit trains per day, each with 100 tank cars, and each traveling 1,300 miles daily (Keystone 2009). It is expected that this configuration would result in significantly more environmental impact during construction and operation than the Project. Impacts on the existing multi-model rail system throughout the Midwest from the Canadian border to Texas would be substantial.”

Still, rail companies are bolstering their crude transportation abilities across North America. Last week, Canadian Pacific announced it would expand its ability to move crude out of Saskatchewan and Cenovus Energy Inc. signed up, saying it had found a short-term fix to its transportation challenges by securing about four dozen rail cars from Estevan.

Rail companies are suggesting transporting crude in rail cars is safe, the right of way and infrastructure exists (no need to wait), there’s less risk and it’s cost competitive with pipelines.

CP and CN are both pushing the option and at a recent heavy oil conference in Calgary, CN market manager Ali Sanjari was trying to sell to producers his rail option to the West Coast. It costs just $8 a barrel, he said, to get from Alberta to B.C.’s West Coast (where Enbridge’s Northern Gateway would go, should it get approved).

“We can go there today,” Sanjari said, noting CN also goes to the East Coast and U.S. Gulf Coast. “We can go where the oil wants to go and where the condensate comes from.”