Oil trains delay Amtrak trains

Repost from The Hill

Oil shipments blocking Amtrak trains

By Keith Laing
January 29, 2014, 06:02 pm
              Getty Images

Freight trains carrying crude oil shipments are blocking Amtrak trains in the northwest United States, according to complaints from the National Association of Railroad Passengers (NARP).

The passenger railway advocacy group wrote in a letter to Transportation Secretary Anthony Foxx that oil-by-rail shipments are blocking trains on Amtrak’s Empire Builder route, which runs from Chicago to Portland and Seattle.

Crude oil train shipments have come under fire after a series of derailments. The railroad passenger association said trains that stay on the tracks are also causing problems for Amtrak passengers.

“Delays of up to eight to ten hours have plagued the Empire Builder, inflicting extreme inconvenience—often at considerable personal expense—to literally thousands of Amtrak passengers and their families,” NARP President Ross Capon wrote to Foxx.

“While severe weather has played a contributing factor, the delays are in large part due to the logjam of rail congestion caused by hundreds of additional freight trains transporting crude oil extracted in North Dakota to refineries in other parts of the U.S.,” Capon continued.

Capon said NARP “recognizes the key role that America’s freight railroads play in fueling economic activity in the U.S.”

But he said that Amtrak and the freight rail company that operates the tracks the Empire Builder line runs on should be able to work out a better scheduling agreement.

“Amtrak and host railroad BNSF Railway Company must come together to ensure that the Empire Builder’s passengers have continued access to adequate, reliable public transportation,” he said. “The Empire Builder serves communities in Illinois, Wisconsin, Minnesota, North Dakota, Montana, Idaho, Washington State, and Oregon, with some 18.8 million people living within 25 miles of an Empire Builder station. The train acts as a vital transportation link for hundreds of rural communities to essential services in urban population centers.”

Supporters of the Keystone XL pipeline have said there would be less crude oil shipment by rail if the controversial project was allowed to be built. The Obama administration has resisted calls for constructing the pipeline, citing environmental concerns, even as it plans to ramp up its regulation of oil trains.

Capon said it was particularly important for officials to figure out a way to make service reliable on Amtrak’s northwest line because it travels through several smaller states that have sparse air service.

“Amtrak’s Empire Builder carried 536,400 passengers in fiscal year 2013 along a 2,256 mile corridor that has little in the way of transportation alternatives, and regularly experiences extreme winter weather conditions that close down airports and road networks,” he said. “Without a fully functioning rail service, many of these Americans will be effectively stranded.”

Amtrak spokesman Marc Magliari told The Hill that the company is dealing with the oil train-induced delays by shipping stations in Grand Forks, Devil Lake, Rugby, N.D. to make up time on its overnight cross country trip.

Magliari said Amtrak was negotiating with BNSF Railway for an equitable solution.

“We met two weeks ago with BNSF,” he said. “This dates back well before current winter weather blast. They told us they are making capacity improvements, but we should not expect to see an improvement in how our trains managed with their tracks until later this year.”

Magliari said the detours around trains that are carrying crude oil “requires passengers to disembark in Fargo, N.D. at 3:35 a.m. to get on chartered buses to take them to the three missing stops.

“We’re going to keep working with BNSF to try to mitigate these delays and inform our passengers what’s going on, but we’re concerned about this for our passengers and for our business,” he said. “This is our most popular, by ridership, overnight route in the country. It’s going to celebrate 85th anniversary later this month.”

Amtrak acquired the Empire Builder route from a private rail company when it was created by Congress in 1971.

A BNSF spokeswoman told the Grand Forks Herald newspaper that it was “working” with Amtrak to find a solution to the delays.

The company blamed the train backup on winter weather in the midwest U.S.

“BNSF service is being impacted by extreme cold and winter weather conditions across the Midwest,” BNSF spokeswoman Amy McBeth told the North Dakota paper.

“The extreme cold and snow are presenting significant operating challenges for our operations,” McBeth continued. “To recover, we are operating our westbound trains on our route through New Rockford and eastbound traffic through our Devils Lake route. We will continue working with Amtrak as our network recovers.”

Please share!

Crude by Rail – Market Trends

Repost from Prairie Business

The Crude Frontier: Rail takes lead role in oil boom

By: John Hageman, Forum News Service
Published February 03, 2014

GRAND FORKS, N.D. – An oil boom in North Dakota has brought a flood of workers, infrastructure investment and tax revenues.

But as production soared, it became increasingly difficult to move oil out of the region as pipeline capacity lagged behind.

Enter trains.

The railroads that helped settle the American West more than a century ago are now essential in a new frontier: oil shale production that has reshaped western North Dakota.

Analysts and those doing business in the Bakken say there wasn’t enough existing pipeline infrastructure to handle the rapid increases in crude oil being pumped out of the ground, forcing companies to find other ways to move it across the country. Since then, they are finding that trains have advantages over shipping by pipelines, despite its higher cost.

The transportation shift was swift and drastic. Pipeline transported 74 percent of the oil coming from the Williston Basin in January 2007, as advances in hydraulic fracturing and horizontal drilling began unlocking vast amounts of crude oil from underneath North Dakota.

Rail, on the other hand, transported none of that newly accessed crude.

Last November, rail shipped 71 percent – nearly 800,000 barrels of oil a day – of the basin’s oil, while pipelines shipped just 22 percent, according to estimates from the North Dakota Pipeline Authority. Meanwhile, the number of railcars carrying crude oil on major freight railroads in the U.S. is projected to have grown by more than 6,000 percent between 2007 and 2013, according to the Association of American Railroads.

But that rapid increase also comes as several recent high-profile wrecks have prompted the attention of lawmakers and federal regulators. The closest of those was in Casselton, N.D., about 20 miles west of Fargo, where more than a dozen tank cars derailed in December, prompting the evacuation of the small town after explosions and smoke darkened the sky. That came about two months after another train derailed in Alabama, and after a tragic crash in Quebec last summer killed 47 people.

Industry officials are hesitant to link increased crude-by-rail shipments to more spills, and point out that such crashes are extremely rare. And most say trains will continue to have a role in crude oil transportation in what is now the nation’s second-leading oil producing state.

Seeking certainty

By the end of 2007, oil companies could move 230,000 barrels per day by pipeline out of the Williston Basin – which includes western North Dakota, eastern Montana and part of South Dakota – or to North Dakota’s only refinery, the Tesoro facility in Mandan. At the time, wells in the region were producing almost as much as that.

But production in the basin soared rapidly – largely in North Dakota – to more than a million barrels per day this past September. By the end of 2013, pipelines and the refinery could handle about 583,000 barrels per day, or about 60 percent, according to estimates from the North Dakota Pipeline Authority.

“Building pipelines requires some certainty,” said Steve Magness, managing director of Bakken Oil Express, a rail loading facility near Dickinson, N.D. “And not everybody was just that certain that hydraulic fracturing and horizontal drilling and all that stuff was really going to work as well as it has. And so there was a lot of hesitancy to invest large amounts of money in pipelines and gathering systems until everybody knew that it would work.”

In the meantime, trains have filled in.

According to the pipeline authority, the state’s rail export capacity was 30,000 barrels per day at the end of 2008. That capacity grew to 965,000 barrels per day at the end of 2013.

Adding new pipelines can be more cumbersome than adding crude oil unit trains to existing tracks, analysts said. Constructing new infrastructure, whether it’s pipelines or rail lines, can involve negotiating with individual landowners in order to acquire right of way, said John Duff, an analyst at the Energy Information Administration.“

And that can be a nightmare,” he said. “(Rail) already did this exercise.”

Still, pipeline and refinery capacity in the Williston Basin is expected to reach almost 1.2 million barrels per day by 2016, according to the pipeline authority. That estimate includes the long-delayed Keystone XL pipeline, which North Dakota lawmakers have pushed for in the wake of the Casselton train derailment but still awaits the Obama administration’s approval.

Pipelines remain the dominant form of moving crude oil across the country. In 2012, 7.5 billion barrels of crude oil were transported by interstate pipelines, according to John Stoody, a spokesman for the Association of Oil Pipelines, compared with the 286 million barrels that is projected to have moved by rail in 2013.‘

A bright spot

’s total haul.

“It’s the type of revenue that any company would like to have,” said Barton Jennings, a professor of supply chain management at Western Illinois University and a member of the National Railway Historical Society. “It’s not revenue they thought would be there.”

BNSF’s revenues grew from $14 billion in 2009 to almost $21 billion in 2012, though it’s not clear exactly how much crude oil had to do with that increase. Crude oil only accounts for 4 percent of the total network volume for BNSF, the largest railroad operator in North Dakota, according to company spokeswoman Amy McBeth.

s gross domestic product. So in the early years of the recession, when GDP declined, so did rail shipments before rebounding in the past few years, according to the AAR.

Crude oil and sand used in the hydraulic fracturing process have provided some positive news for the rail industry in the midst of declining coal shipments.

“For the railroad industry, it’s been a bright spot,” Brisben said.

Companies like BNSF have made significant infrastructure investments to accommodate the newfound business. In North Dakota alone, it has spent $540 million over the past four years, and its Williston Basin oil transport capacity reached 1 million barrels per day in 2012.

“These investments across the state strengthen our privately funded rail infrastructure and not only make it safer, they also enable BNSF to support the state’s growing freight traffic for all industries and we plan to continue investing just as aggressively in 2014,” McBeth wrote in an email.

The enormous increase in crude-by-rail shipments has also kept tank car manufacturers busy. As of September, there were 58,910 tank car orders on backlog, according to Richard Kloster, a consultant at FTR Consulting Group, who guessed “at least half of those cars are sized and spec’d for moving crude oil.”

“And it’s not just North Dakota. It’s also Texas and, in particular, the (Canadian) oil sands.”

Indeed, foreign rail shipments in 2012 jumped by about 10,000 – from 1,000 to 11,000 – from the previous year, according to the Institute for Energy Research.

‘Critical’ role

Rail facilities, which receive oil by truck or pipelines before being loaded into tank cars, have sprung up across the Bakken region since the beginning of the oil boom. And unit trains – trains that can be more than 100 cars long and carry one commodity from one origin to one destination – have become increasingly common.

The first unit train facility designed to load crude oil was built by EOG Resources near Stanley, N.D., in 2009. The company loaded 322 unit trains of its own crude and that of other producers in 2012.

Since 2009, about a dozen unit train facilities have popped up on BNSF’s network alone. U.S. Rep. Kevin Cramer, who toured the EOG facility when he was a member of the state’s Public Service Commission, said that’s because of the “ability to move product by rail to the highest bidder.”

Enbridge, a pipeline operator, began adding rail facilities in 2012. Its Berthold, N.D., facility can load 80,000 barrels per day.

Katie Haarsager, an Enbridge spokeswoman in North Dakota, said Enbridge is still focused on pipelines. It’s currently planning the 610-mile Sandpiper Pipeline, which will transport up to 225,000 barrels a day from western North Dakota to Clearbrook, Minn., on its way to Superior, Wis.

“Pipeline is where we want to make our long-term investment,” she said. But, she added: “that rail facility that we have in Berthold will always have a very critical place in being able to deliver crude to the U.S.”

Market dynamics

The share of oil being exported out of the Williston Basin by rail had been growing steadily for about two years, until April 2013, when three-fourths of it left by rail. But suddenly, that rate began to decrease, dipping to 61 percent in August.

Meanwhile, shippers turned to pipeline, increasing its share of oil exports from 17 percent in April to 31 percent by August.

What happened last year is an illustration of how prices can quickly affect how crude oil is shipped.

Two of the most popular benchmarks used by crude oil buyers and sellers to help set prices – West Texas Intermediate and Brent – had tracked fairly closely in early years of the Bakken oil boom. But since 2011, WTI has been consistently lower than the Brent benchmark because of increased production and transportation bottlenecks.

Brisben, the PLG analyst, said the original push for rail shipments was aimed at getting oil to the storage hub at Cushing, Okla., where oil is typically traded using the WTI benchmark. Meanwhile, refineries on the coasts taking imported crude are trading using the Brent benchmark or something similar.

“And that’s what caused crude-by-rail to be an activity that really wasn’t about getting the barrels to Cushing, but let’s get them to these other places where we’re going to fetch a higher price,” Brisben said.

And even though rail transportation is more expensive than pipeline – about $6 more expensive per barrel of oil according to a report from the firm Ernst & Young – that heavier price tag will matter less when the difference between the WTI and Brent benchmarks is wide enough. The spread has been as high as $23.

In the case of last summer, the difference between the two benchmarks narrowed to less than $5, and the shift away from rail transportation followed.

Analysts added that trains are the only option to send crude oil from here to the coasts.

“We never will see a pipeline going east to west, pipelines pretty much go north-south, so the only way to get the crude out is by rail,” said Neil Amondson, vice president of NorthStar Transloading, which is constructing a rail terminal that will open this year on the North Dakota side of the state line from Fairview, Mont.

Rail to stay

Even as the industry faces the potential for updated regulations, analysts and lawmakers say trains will have a critical, if not increased role in transporting crude oil.

Lynn Helms, the state’s top oil regulator, said 90 percent of the state’s oil could be transported by rail this year.

“The amount that operators continue to utilize rail in the coming year is still very much dependent on market dynamics,” he said in an emailed statement. “Federal policy could eventually have some effect on shipping methods; however, it is too early at this point to be able to make that determination.”

But even as lawmakers push for changes to make crude oil transportation safer, they acknowledge rail is here to stay.

“We are not going to take crude off the rails anytime in the near future. Or ever,” U.S. Sen. Heidi Heitkamp said. “It’s not going to happen.”

“As long as we have a Bakken play, we will have oil on tank cars on the rails.”

Forum News Service reporters Kyle Potter and Amy Dalrymple contributed to this article.
Please share!

Latest oil train derailment

Repost from Reuters

Train carrying fuel oil derails, spills in Mississippi

By Therese Apel
Fri Jan 31, 2014

JACKSON, Mississippi (Reuters) – A Canadian National Railway Co train carrying fuel oil and other hazardous materials derailed and was leaking in southeast Mississippi on Friday, forcing the evacuation of nearby residents, officials said.

Reuters / Andrew Burton

No one was injured in the incident which involved the derailment of 21 railcars, eight of which have spilled their contents, a Canadian National Railway spokesman said.

Several of the cars were carrying hazardous materials including fertilizer and methanol, but there was no fire, he said.

The accident, the latest in a string of North American train derailments over the past year, occurred in the city limits of New Augusta in Perry County, near a mobile home park, according to the Mississippi Emergency Management Agency.

Emergency services were on the scene and responding to the accident, local officials said.

Local sheriff Jimmy Dale Smith said that fewer than 20 people have had to be evacuated at last count.

“They’ve got these spills pretty much contained and secured, and we’re working on starting the cleanup process at this point,” Smith said from the scene. “Hopefully we can get everything cleaned up this afternoon and get people in their homes tonight.”

Friday’s accident follows a spate of explosive derailments of trains carrying crude oil over the past year that has raised questions about safety, especially of some older tank cars prone to puncture.

Federal regulators have been studying railcar design and other issues after the accidents, including one last month when a 106-car BNSF Railway Co train carrying crude east crashed into a derailed westbound BNSF grain train near Casselton, North Dakota.

Last July, a runaway oil train derailed and exploded in the center of the Quebec town of Lac-Megantic, killing 47 people.

(Additional reporting by Solarina Ho in Toronto; writing by Edward McAllister in New York; editing by Matthew Lewis)

Please share!