I have noticed some BNSF trains (I suspect H BARPAS and H PASBAR) that have large blocks of tankcars carrying crude oil (possibly light crude since the placards are flammable instead of combustible and the tankcars are 30,000 gallon capacity). So far I have not been able to find evidence of Bakken crude going to Los Angeles area refineries. However, since this appears to be new, I wonder if that is what is going on.
I’m actually most curious as to the routing of how BNSF would ship this from the Bakken formations in western ND to LA - possible take it over Cajon Pass to get to their transcon? Or take it west to the cost and then take it south through oregon and CA? The best route would be UP’s route from Salt Lake City to LA, but I don’t believe that BNSF has trackage right there. Any thoughts?
I’m not sure about BNSF but KCS has announced the construction of a unit train crude oil facility in Port Arthur TX for unit train coming in from the Bakken Shale.
There are three refineries in Montana and four in Wyoming. Why would they ship the crude farther south than necessary?
Not all refineries are created equal. Each refinery is designed to process a specific type of crude oil which ranges from Light, to Intermediate, to Heavy, and also from Sweet (low sulphur) to Sour (lots of Sulphur). The Refineries in Montana are running at or near capacity on the type of crude that they are designed for and supplied by pipeline. The Bakken Crude is a Light and fairly sweet crude that commands a top price. The owners of the Bakken crude are moving it to terminals where they can get the best price. In the last year Cushing, OK (the largest spot market and terminal for crude) has had a glut of Light Sweet Crude relative to the Refineries connected to it by pipeline. So the owners of the Bakken crude have been shipping their oil to terminals where they can get a better price. The price of delivered Light Sweet Bakken Crude at St. James, LA has been enough higher than the Cushing, OK terminal that it more than compensates for the rail freight charge to ship it there. Louisiana Crude Oil is a Light Sweet Crude similar to Bakken Oil, with production of Louisiana Oil failing for the last several years, Refineries set up to process Louisiana Oil have to either get similar oil from the Persian Gulf or have the Bakken Oil shipped by Rail to a location where it can be put into a pipeline for final delivery. The Oil Producers like Rail’s flexibility to change delivery locations with the changing price of oil at each market. Gone are the days when the big oil companies controlled production from Well to Gas Station. We are fast approaching the day when the big companies like Chevron, BP, Shell, and Exxon, will not own any Refineries or have any interest in Gas Stations. Marathon Oil just sold the Refinery nearest me in St. Paul to a company that didn’t exist last year. The company that bought it was formed by an Investment Fund that feels they can make money now. You may not be aware of it, but collectively US refineries lost over $300 million dollars last year. That is why several have closed.
This is worth repeating to emphasize it.
Clear and informative explanation otherwise, too - thanks ! [tup]
- Paul North.
I thought BNSF was granted trackage rights over the former Western Pacific’s Feather River Route, but had not yet ever utilized them. (Not at all certain about that, and could well be wrong, though.)
- Paul North.
Actually, ssuming that there would be a direct rail route south from the Bakken fields I’m pretty sure the fastest way to take the crude there would be via Raton pass - that’d give the line some freight traffic again, but the thing is that there isn’t any direct line south from the Bakken fields, you gotta detour either west or east before you go south. That’s why I thought maybe going west and then south along the west coast would have been faster. Any thoughts on this?
BNSF has a combination of Trackage Rights/Haulage Rights from Denver to Stockton, CA. It is always over the former Rio Grande on the eastern end, but on the west end UP will route the BNSF trains over either the former WP or over Donner Pass at their option. BNSF does not have access over the LA&SL through Las Vegas, NV.
You won’t see the oil producers building any more refineries either. There is not enough oil left to process that would justify that kind of investment. They would never make their money back. But I guarentee you will see Natural Gas facilities pop up all over the place out there.
[quote user=“Sawtooth500”]
Paul_D_North_Jr:
Sawtooth500:
I’m actually most curious as to the routing of how BNSF would ship this from the Bakken formations in western ND to LA - possible take it over Cajon Pass to get to their transcon? Or take it west to the cost and then take it south through oregon and CA? The best route would be UP’s route from Salt Lake City to LA, but I don’t believe that BNSF has trackage right there. Any thoughts?I thought BNSF was granted trackage rights over the former Western Pacific’s Feather River Route, but had not yet ever utilized them. (Not at all certain about that, and could well be wrong, though.)
- Paul North.
Actually, ssuming that there would be a direct rail route south from the Bakken fields I’m pretty sure the fastest way to take the crude there would be via Raton pass - that’d give the line some freight traffic again, but the thing is that there isn’t any direct line south from the Bakken fields, you gotta detour either west or east before you go south. That’s why I thought maybe going west and then south along the west coast would have been faster. Any thoughts on this?
BNSF is directing all southward traffic from Denver with a west coast destination to go east from Pueblo to Las Animas Jct. and then to Amarillo where it then uses the Transcon. They have decided that the Raton Pass line will be left only to Amtrak and have odffered Amtrak the opportunity to use the Transcon instead of the Raton line.
[quote user=“diningcar”]
Why would BN
Simple answer is that the line via Amarillo has much lower grades than Raton Pass. My recollection is that the ruling grade on Raton is 3%, and the cost of the extra motive power needed to climb that hill outweighs the savings from the shorter run
- Erik
I speculate that the legalities and ‘politics’ of the Raton Pass route may also play a part. BNSF having declared it surplus and committed to sell it to New Mexico (and Colorado ?), it would not look good to have to do another ‘Stampede Pass’ kind of maneuver and attempt to or have to buy it back to essentially re-open it to freight traffic. That kind of ‘need’ would leave BNSF in a weak bargaining position and perhaps result in a higher re-purchase price than the sale price, and also bearing a larger share of the maintenance and upgrading costs, etc.
Speaking of which, I believe BNSF hasn’t done much heavy maintenance on that line for like 5+ years now, again on the basis that it is now or soon going to be NM’s and/ or Amtrak’s responsibility. If BNSF wants to run heavy freight trains over it, a lot of that ‘avoided’ maintenance work would have to be caught-up with rather quickly - don’t think that’s in the cards, either.
By the way - anybody have an idea or estimate on how much Bakken crude is being produced and/ or shipped out ? Just trying to get a ‘handle’ on roughly how many trains per day might per involved there. Thanks.
-Paul North.
The State of NM already owns the line south from Lamy. It had to withdraw from its agreement to purchase the line from Trinidad, CO to Lamy because of current financial constraints.
Shorter in miles is only one segment in efficient operation of a RR. The BNSF people have gained a reputation making very good decisions, at least Warren Buffett thinks so.
Beaulieu saiid; (in part):
“…The price of delivered Light Sweet Bakken Crude at St. James, LA has been enough higher than the Cushing, OK terminal that it more than compensates for the rail freight charge to ship it there. Louisiana Crude Oil is a Light Sweet Crude similar to Bakken Oil, with production of Louisiana Oil failing for the last several years, Refineries set up to process Louisiana Oil have to either get similar oil from the Persian Gulf or have the Bakken Oil shipped by Rail to a location where it can be put into a pipeline for final delivery. The Oil Producers like Rail’s flexibility to change delivery locations with the changing price of oil at each market. Gone are the days when the big oil companies controlled product…”
I notice in the above statement by Beaulieu, a similarity to what has been a wide-spread practice in the lmber and building materials industry for a number of years; The loading of a rail car of a specific grade of materials and then sending that car on a routing that would consume much travel time. [ie; Routing to a destination with an infrequent level of service] . That would give the sellers sales department the opportunity to find a buyer foir that load.
The ‘game’ within that tactic is that, if the price is too high, and a buyer cannot be found, the seller must reduce the price of the product, [the closer the car is to its original stated destination,the more aware the shipper is, of the liablility for demurrage charges] If the carload reaches its destination, then, the seller is faced with ‘eating’ the demurrage on the car til a buyer can be found, and the car sent to be unloaded. That same car can be handled by a simple re-routing by the railroad if sold in route.
I am not sure if petroleum would qualify under a similar set of rules.(?) That bear in mind the other statement that many refineries are near capacity, and are generally confin
Is this business subject to eventual pipeline construction and competition?
In view of these facts /opinion, I doubt if a pipeline would be willing to risk either a shortfall of oil or a change in the delivery points, either of which would ‘strand’ their investment without customers from whom to return it. While the pipeline might seek a long-term contract with the producers, they too might be unwilling to commit to a certain volume that might not be recoverable, or to lock themselves into a specific market when they may be able to get better prices elsewhere. Said another way, they may be gambling on taking advantage of better and rising prices for their ‘good stuff’ in the ‘spot’ market, as opposed to locking into a long-term contract at a pre-determined prices to just a handful of buyers in one or a few locations that would be served by an inherently limited and inflexible pipeline.
- Paul North.
Regardless of who hauls the Bakken Crude where ever, it still is not enough to effect/affect market prices for crude oil. As stated above, there are only so many refineries capable of refining the sweet crude. The other side is that with the permit process taking near to five plus years to get a new refinery built…it is very doubtful that regardless of the size of the Bakken field, it’s impact on the market place will be marginal at best.
Excellent explanation of the refinery problem. Bakken crude’s going all over the place since there’s very limited light-crude refining capacity in the region aside from Tesoro’s refinery at Mandan, North Dakota. Refining’s a tough, tough business that exists on the margin between the price of crude oil and product prices at the pump. Meanwhile, Watco’s Stillwater Central Railroad (former Frisco/Burlington Northern) has a crude terminal under construction at Stroud, Oklahoma. Bakken crude will be unloaded from unit trains into a new pipeline to the nearby Cushing tank farm/pipeline hub. Service will start this fall.