The discussions on oil transportation have been numerous and detailed, but here is another blog on RBN’s excellent website about the increase in oil production and how the rails are supporting the boom in the oil patch.
Briefly here is a summary of the blog, as it relates to railroads:
Infrastructure is in place at Eagle Ford, Tx for the movement of crude to refineries in the Gulf Coast region, however the Bakken oil field in ND does not yet have the pipeline capacity to move large amounts of oil. At this time 56% of crude out of Bakken is moving via rail and 44% by pipeline. The Association of American Railroads report that during 1H, 2012 there were 241,000 railcar movements of oil vs 174,000 in same period 2011.
Rail is offering value:
Less capex is required for infrastructure (pipelines).
Quicker movement of oil from new production as railroads are quickly adding capacity rather than waiting for pipelines.
Flexible marketing of the crude oil.
The higher quality of oil (lighter and sweeter) can be isolated in rail movements vs blended in pipelines.
The railroads can bypass the logjam at Cushing, Ok, which has resulted in a discount of crude oil prices as product cannot be moved.
It appears that railroads, while losing some marketshare to pipeline which come on line, will be able to retain certain movements.
One other take-away I got from the article concerning the Cushing choke point, is that while plans for pipelines from there to the Gulf coast are…well…in the pipeline, the refineries are configured for more intermediate crudes, and they can absorb only so much more lite Bakken crude. Unless they start tankering it to East and West coast refineries which take the lite crude, rail will continue to haul to those destinations.
In another of the author’s linked articles he says the changing mix of crudes “will result in imbalances of various intermediate feedstock streams within the U.S. refining system…This will result in lucrative trading opportunities to match refinery feedstock surpluses and shortages around the country.” While some refineries are next to each other, and others are connected by product pipelines, this may be another opportunity for rail to haul oil.
I cannot emphasize enough how informative these blogs are. I go there daily and find the blogs educational and easy to read. About 1x week rail is involved. These guys and gals understand railroading and how it pertains to their industry.
Something else to keep in mind is the amount of oil. At its zenith the Trans-Alaska Pipeline carried 2 million barrels-per-day in the late 1980’s. Today it’s about a quarter of that. It is implausible to assume the Bakken will ever get to that level. How high does production need to be to justify the fight necessary to lay a pipeline?
The Alaska PL was 48", whereas the current Keystone project is 36". Remembering that pipeline volume is proportional to the cross-section area, that’s a little more than half the volume. The PL is mainly for Canadian Tar sand oil, but will also carry Bakken. Keystone has just jumped another hurdle (see link):
I had heard that there was consideration of using heated tank cars to haul the heavy tar sand oil. The above article shows another way that rail is uniquely complementary to tar sands oil transport.
Canada is now looking at alternate routes for oil, towards the west coast at Kitimat B.C. improving docking facilities for the China market, also talk of a massive new refinery there so they can ship refined products rather than crude oil, also 2 new upgraders in Alberta with a new refinery close to the tarsands so they do not ship crude for others to refine. It would seem the Canadian thinking is to produce more products rather than shipping raw materials to others to manufacture goods. Even natives in Alberta are thinking of refineries, maybe change the Canadian mentality of “Hewers of wood and drawers of water” eh?
Southern Pacific Resource Corp., which began trucking out initial production from its new McKay Thermal Project three weeks ago, will open a dedicated rail terminal in a few weeks just south of Fort McMurray and ship its product in leased tanker cars via CN Rail all the way to Natchez, Miss.
Victrola1, maybe since the river is low requiring light loads might take away some of barge’s cost advantage. Although I suspect speed of transport is a larger factor. It may be that they need barges near the end to serve refineries that can handle water side deliveries, but don’t have a unit train unloading facility.
I remember reading about how the RRs moved oil rapidly during WW-2. This was from TEXAS (?) to a pipeline somewhere in the north east ? If someone can find these articles it may interesting to compare that time with what is being done today. The only other thing I remember about the articles were that unit trains were about 65 - 85 cars pulled by one or two steam engines with empties returned quickly.
All means of transporting oil and product in bulk, especially aviation gasoline, were put into service in the U.S. during the World War II years, 1941-45. Some experience had been gained during the prior emergency of the Great War, 1914-18 (the U.S. entered in 1917), but WW II was a much more massive undertaking as well as being fought on two gigantic fronts. Fortunately, as far as demand for refined oil and gasoline was concerned, the peak year for the Pacific front was 1945, particularly the months of May and June, while the major shipments to the U.S. East Coast for the European Theatre occurred before that, the peak being mid-1943.
The number of tankers sunk by U-boats in the first 3 months of 1942 alone was almost 4 times the number built. Tankers and other ships were urged to hug the coast, and those that could fit took the Cape Cod and Delaware Chesapeake canals. The U.S. clearly had neglected anti-submarine warfare and was unprepared for the onslaught. American cities’ night bright lights also helped to make the sinking of ships easier by providing perfect silhouettes of the tankers for the stalking U-boats. Efforts made to improve the situation included: outdoor lighting was reduced in the eastern seaboard, curtains were drawn to reduce indoor lights, convoys were instituted on the East
The CN isn’t going to give a barge line any more of the through revenue than it has to. Railroad economics are driven by volume, among other things. The added oil tran volume will reduce CN’s average cost per load on the old Soo Line and the Main Line of Mid America. For all loads, not just the oil. The rates on the existing business won’t be reduced because of the oil. So the added traffic will improve profitability in more ways than one. As long as it stays on the railroad and not the river.
If CN even offers a price to a barge transfer at St. Paul it will be set high enough so as to make through rail movement to Natchez a cheaper option for the shipper. This isn’t a situation where they want to “Play Nice” with a barge company.
One of the changes I’ve seen since the 1970s is that the railroads have become much more effective competitors against the barges. I never thought I’d see through rail ore movements out of Minnesota to Birmingham or shuttle train grain loading close to the Illinois River. Those are important changes in the transportation market. (The Federal Government used to protect the barges from rail competition by h
Back when the SP and Santa Fe were attempting to merge, SP sold/merged its land development company to Santa Fe, forming the Santa Fe Pacific Corp. a holding company for both companies non-railroad interests.
In California, this holding company became Catellus (sp?) which was the states largest private land owner….subsequently this company purchased the UP’s interest in the LA Union Station.
In 2005 Catellus merged with Pro-Logis, becoming the world’s largest distribution company and private landowners.
I doubt there is a single major city in the US that Pro-Logis doesn’t serve or have some form of distribution warehouse/property; at least five of our major customers at the PTRA are in Pro-Logis properties.
They have changed their company name to Prologis, here is a link…
I wanted to bring to your attention three recent developments in the ongoing movement of Oil by Rail.
CP is now shipping oil from a BP facility at Stoughton, SK, to a refinery at Port Westward, OR. The routing for this movement has raised some eyebrows on the Canadian forums. It is proceeding from Stoughton, up to the mainline, then west over the usually capacity constrained mountain route to Vancouver, transferred to BNSF to Willbridge(Portland), then handed off to the Portland & Western RR, who will deliver it to Port Westward. Inquiring minds would like to know why this cargo isn’t taking the route of the Potash unit trains from the mines in Saskatchewan to Portland via the Crowsnest Pass to Kingsgate BC/Eastport, ID and on to the UP via Spokane, WA to Portland. Perhaps Bruce K. or other Pacific Northwest RR authorities/aficionados can shed some light on this.
CP has signed a five year take-or-pay agreement with ConocoPhillips to haul crude from the Bakken field in ND to a refinery at Linden NJ(via barge). Do any of our East Coast members have any more info on this? Here is a link to a story in the Financial Post:
The first tentative pipeline projects from the Bakken field to refineries in ON, QC, and the US Midwest have been announced. Enbridge Inc., and its’ US affiliate have announced that a portion of their planned $6.2 billion in new projects will be done there. As environmental opposition and other soft costs mount though, this could be a long time coming. Here is a link to that story:
I was just reporting on what I read on the other forum. The website for the Portland & Western RR does show Port Westward, OR. Perhaps there is a reporting delay on the site you linked to. Beyond that, I can find no further info on the subject.
How is CP routing this freight? Thru Chicago and on the NS all the way to Albany? or thru Chicago and on NS/trackage rights and thru Detroit, then back down to Albany? Or the Canadian routing?
Based on the article, the volumes will be close to one train per day with revenues in excess of $200,000 per train without added investment of cars. Sweet oil, sweet deal.