Crude oil joins rail industry staples as key revenue producer
By Jarrett Renshaw, Mar 16, 2015 2:05pm EDT
(Reuters) – U.S. railroads generated almost as much money last year hauling crude oil and sand, largely used in hydraulic fracturing, as they did moving industry staples like field crops and motor vehicles, according to a Reuters’ analysis of newly released federal data.
The previously unreported company data submitted to the U.S. Department of Transportation provides the latest piece of evidence of the blossoming marriage between the energy and rail industries, forged on the back of the U.S. shale oil boom.
Led by Berkshire Hathaway-owned BNSF Railways, the seven largest railroads operating in the United States generated $2.8 billion in gross revenue from hauling crude oil in 2014, up nearly 30 percent from 2013, according to company data filed with the federal government and released earlier this month.
The $2.8 billion figure puts crude oil in sixth place among similarly classified products, trailing industry standards like coal, field crops and motor vehicles, the analysis shows. Sand and gravel, an often overlooked winner in the shale boom, generated $2.7 billion last year in gross revenue.
Crude oil provides the biggest return on a per-carload basis, drawing $5,700 in gross revenue for each car that originated on the network, more than double than what coal brings.
The continuing financial success comes as the industry faces threats from a massive drop in oil prices and impending new U.S. regulations aimed at public safety that could impose additional costs.
“Will the major carriers go belly up? No,” said Barton Jennings, a professor of supply chain management at Western Illinois University. However, short-line cariers that rely upon crude for the bulk of their business may be exposed, he said.
Overall, the seven major carriers reported U.S. profits of $14.4 billion last year, led by Union Pacific and BNSF, which combined accounted for 67 percent of the industry’s U.S. profits, the analysis shows.
KING CRUDE
The biggest player in the U.S. crude rail business is BNSF, which dominates North Dakota, home to the Bakken shale.
BNSF’s gross revenue from crude oil rose to $1.48 billion from $63 million in 2010. Gross revenue from hauling sand and gravel climbed to $651 million last year, a more than 300 percent jump from 2010.
The growth in crude and sand hauling helped BNSF boost profits, which climbed from $2.6 billion in 2010 to $4.4 billion last year.
(Reporting By Jarrett Renshaw; Editing by Jessica Resnick-Ault and Jonathan Oatis)
Repost from Bloomberg News [Editor: Many groups have called for a moratorium on crude by rail; this may be the first time a highly respected national media outlet has highlighted this view in a headline. New in this report: “The U.S. Department of Transportation said 14 cars were in a pileup and half of those were punctured. Emergency responders evacuated a 1-mile radius, which contained six homes.” – RS]
CN Rail, BNSF Tackle Accidents as Group Seeks Ban on Oil Trains
March 8, 2015, by Doug Alexander9:33 AM PDT
Smoke and flames erupt from the scene of a train derailment near Galena, Illinois, on March 5, 2015. Photographer: Mike Burley/Telegraph Herald via AP Photo
(Bloomberg) — Canadian National Railway Co. is building a 1,500-foot (457 meter) long track to bypass a burning train that derailed Saturday in northern Ontario, while BNSF Railway Co. crews are working to reopen track in rural Illinois after a train carrying oil derailed three days ago.
CN crews teamed with outside specialists are fighting the blaze after an eastbound train carrying crude oil derailed and caught fire around 2:45 a.m. near Gogama, about 600 kilometers north of Toronto, cutting off rail traffic between Toronto and Winnipeg, Manitoba. The BNSF train jumped the tracks Thursday afternoon near Galena, Illinois, about 160 miles west of Chicago, according to the railroad, a unit of Warren Buffett’s Berkshire Hathaway Inc.
The accidents bring to four the number of oil train wrecks in North America in the past three weeks, according to the Center for Biological Diversity. The environment group is calling for a halt to transport of oil by rail, which has surged since 2009 with the boom in crude production from shale.
“We need a moratorium on oil trains,” Mollie Matteson, a senior scientist at the center, which has fought to protect wildlife for 26 years, said in a March 7 statement. “The oil and railroad industries are playing Russian roulette with people’s lives and our environment.”
The BNSF train was carrying oil from North Dakota’s Bakken shale formation for Mercuria Energy Group Ltd. Twenty-one of the train’s 105 cars, which include two sand cars as buffers, jumped the tracks Thursday afternoon. The U.S. Department of Transportation said 14 cars were in a pileup and half of those were punctured. Emergency responders evacuated a 1-mile radius, which contained six homes. No injuries have been reported.
BNSF plans to reopen its mainline track Monday, Mike Trevino, a spokesman for the railroad, said in a phone interview Sunday.
40-Fold Increase
North American oil producers have increased their reliance on rail as new pipelines failed to keep pace with a surge of production from shale. The typical rail car carries about 700 barrels of oil, according to data posted on BNSF’s website. The number of oil carloads rose more than 40-fold from 2009 through 2013, when 435,560 carloads were shipped, and kept climbing last year to an estimated 500,000, according to the Association of American Railroads.
The CN derailment damaged a bridge over a waterway as five tank cars ended up in the water, with some of them on fire, the Montreal-based railway said in a Saturday statement. Crews have placed three lines of booms on the river to contain the crude. Drinking water supplies to Gogama Village and a nearby Mattagami First Nation community are not affected, CN said.
“Fire suppression activities will begin later today,” spokesman Jim Feeny said Sunday in an e-mailed statement. “Residents will likely see occasional smoke plumes of various shades of black, gray or white. This is expected, normal, and poses no threat to the public or the environment.”
Pipeline Limits
The railcars, carrying crude oil from Alberta, are CPC-1232 models railroads began to roll out in 2011 to boost safety.
The accident marks the second derailment of a CN oil train in three weeks near Gogama. A train with 100 cars, all laden with crude from Alberta bound for eastern Canada, derailed on Feb. 14 about 30 miles north of the town. A total of 29 cars were involved in that incident and seven caught fire, a spokesman said at the time.
Investigators from the Transportation Safety Board of Canada are on site, which is 37 kilometers from the previous accident, agency spokesman John Cottreau said Sunday by phone. The train was headed to Levis, Quebec, when 30 to 40 cars derailed.
“Billions of gallons of oil pass through towns and cities ill-equipped to respond to the kinds of explosions and spills that have been occurring,” according to the Center for Biological Diversity. “Millions of gallons of crude oil have been spilled into waterways.”
Nebraska has emerged as ground zero in oil transport showdown
September 21, 2014, By Russell Hubbard
SARAH HOFFMAN/THE WORLD-HERALD | Oakland, Nebraska, and the tracks that carry trains through town have been together for more than 100 years. But trains hauling crude oil in tanker cars through Oakland and other parts of the state are a recent development, and concerns about safety grow. Oil pipelines such as the proposed Keystone XL have their opponents as well.
OAKLAND, Neb. — If you visit here and turn off Oakland Avenue toward the railroad tracks, you just might find Brendan Murray prowling up and down the street, cataloging the cracks in the pavement and the scars on the buildings.
SARAH HOFFMAN/THE WORLD-HERALD | Brendan Murray holds a piece of a building that fell near the tracks. He often walks Oakland Avenue cataloging cracks in the pavement and on buildings that he suspects are caused by vibrations from oil trains.
The owner of an apartment building facing the railroad tracks says problems with his 100-year-old structure accelerated with the massive increase in BNSF Railway trains hauling crude oil in tanker cars. Murray also says a derailment and crude oil fire would be deadly for Oakland, population 1,244.
“Keep it underground,” Murray says, referring to transporting crude by pipeline.
Not so fast, says Jane Kleeb. She is not a fan of crude trains either, but she is also the director of Bold Nebraska, the group opposed to construction of the Keystone XL pipeline. It would bring 1 million barrels of crude oil per day across the state.
Kleeb said her group doesn’t expect the world economy to forgo fossil fuels and survive on renewables right now. But she said the pipeline proposed to transport northern crudes to refineries presents too much environmental risk.
“Accidents are going to happen and it is Nebraska that is going to wind up paying for it,” Kleeb said.
All of which leaves a rather obvious question: If neither by train nor pipeline, just how is oil supposed to get from where it is produced to where it is refined into fuels and other materials that power the U.S. economy?
With its main modes of transport assaulted on all sides, the petroleum industry faces a major showdown, and Nebraska is shaping up to be ground zero.
Central to both major U.S. railroads hauling crude oil — Union Pacific is based in Omaha and BNSF’s parent company is based here — the Cornhusker State is also the terminus of the existing Keystone pipeline and is the proposed ending point for the much-debated and delayed Keystone XL.
“Some of the people who don’t want us to transport oil don’t want us to use oil,” said John Felmy, chief economist for the American Petroleum Institute, a group funded by oil companies. “We need to do a better job about telling our story, but we also need to be honest about the realities of energy.”
The United States last year consumed 6.89 billion barrels of petroleum products, producing 2.7 billion barrels itself, making it the global leader. Oil is everywhere — about 71 percent goes for gasoline and other fuels. Other common uses are rubber, fabrics and solvents.
There are no current replacements for oil, Felmy said, calling renewable energies promising and worthy of development but not an immediate substitute. And “choking off the supply points and the transport links would have serious implications for the economy,” Felmy said.
One of those transport links runs through Oakland. The rear of the buildings along Oakland Avenue, 20 or so brick and masonry two- and three-floor structures, face the north-south railroad tracks operated by BNSF Railway, the employer of 5,000 people in Nebraska that is owned by Omaha’s Berkshire Hathaway Inc.
The closest buildings, such as Murray’s 12-unit apartment building, are about 45 yards away.
The tracks and the town in Burt County have been together for more than 100 years. But the oil trains are a recent development. Oil shipments from North Dakota’s recently tapped shale formations first hit 800,000 barrels a day late last year, up from fewer than 100,000 barrels a day in 2010.
BNSF is by far the largest carrier, its oil trains entering Nebraska at South Sioux City from routes in Iowa. Oil has been a growth business for BNSF: Volumes from shale formations such as those in North Dakota have risen to 620,000 barrels per day last year, from 59,000 barrels per day in 2010.
Transporting crude has been a huge boost for BNSF, bought for $26 billion in 2009 by Omaha’s Berkshire Hathaway. BNSF operating revenue, the main financial metric by which railroads are gauged, has risen almost 60 percent since 2009, to about $22 billion last year from $14 billion.
“You can feel the ground surging when they come through now,” said the 72-year-old Murray, a graduate of Omaha’s Benson High School who later owned a general contracting company. “It’s just that the railroad has always been here and people don’t pay it much attention anymore.”
A tour of Murray’s street reveals a collapsed brick wall, lots of hairline cracks and loose masonry. Murray acknowledges that most of the buildings are 100 years old or older, and that he can’t prove the cause. But he said he suspects the culprits are the heavy liquid cargo and the increased frequency of trains passing by because of sharply higher crude shipments.
BNSF says: Nonsense. “We know of no mandated statutes requiring maximum or minimum weights for trains, although there are different weight rails according to the type, size and speed of trains,” said BNSF spokeswoman Roxanne Butler.
The railroads say oil by rail, while the subject of much debate, is quite safe.
In 2012, according to the Association of American Railroads, the incident rate for release of hazardous materials from rail cars was 0.013 per thousand carloads, down from 0.14 in 1980. That means, the association says, that 99.99 percent of hazardous rail cargo shipments are incident-free.
It is a highly regulated industry. Federal regulators set the standards for hauling crude and other hazardous materials, from the route selection and track inspections to train speeds and personnel training, the railroad association says.
“According to the Federal Railroad Administration, 2013 was the safest year in history for the rail industry,” said BNSF’s Butler. “In 2013, BNSF experienced the fewest number of mainline derailments in its history. Rail is the safest mode of land transportation for freight in general and is one of the safest ways to transport crude oil and hazardous materials.”
Butler said BNSF considers all accidents preventable, and is spending $5 billion this year on capital improvements. The Fort Worth, Texas-based company, about tied with Union Pacific as largest U.S. railroad in 2013 operating revenue, also inspects track more frequently than required by regulators, Butler said.
Union Pacific is spending $4.1 billion on capital improvements this year, much of that related to track safety.
U.P. Chief Executive Jack Koraleski said the industry also is working with the Department of Transportation to make existing crude tank cars safer, and to develop a new and stronger one.
There has never been a fatal U.S. oil-train incident, though 47 people were killed last year when one derailed and blew up in Quebec, Canada.
Koraleski, whose company employs about 8,000 people in Nebraska, said the probabilities of such accidents are small and the trade-offs worth it.
“We have been hauling crude by rail for a long time,” said Koraleski, whose oil shipments rose 20 percent last year. “If the pipelines don’t, and the railroads don’t, the alternatives are fully negative for the U.S. economy.”
As for the Keystone XL pipeline proposed by pipeline operator TransCanada, it is on hold pending permit approval by President Barack Obama.
It should not be approved, said Kleeb, the director of Bold Nebraska. She said the pipeline endangers the Ogallala Aquifer and only encourages oil companies to spend additional money chasing harder-to-get deposits, such as shale formations in the northern United States and southern Canada. Those require rocks underground to be broken up under high pressure to release the petroleum.
Kleeb says she and her group are not against fossil fuels, acknowledging that it would be impractical to go 100 percent renewable immediately. She also said ceasing production from hard-to-get deposits in North Dakota’s Bakken region isn’t going to send the economy into a malaise. The Bakken produces about a million barrels a day out of the 19 million consumed each day in the country.
“What we need to do is slow down,” Kleeb said. “The oil isn’t going anywhere. You can make all the money you need to make.”
Mark Johnson, the Nebraska spokesman for TransCanada, said pipelines are the most efficient method of transporting oil between distant points, passing along the lowest costs to consumers.
“The bottom line is that the United States needs oil and it is going to get to market one way or another,” Johnson said.
The Keystone pipeline, now about four years old, runs from the southern Canadian province of Alberta and terminates in southern Nebraska at Steele City, the proposed endpoint for the Keystone XL.
Johnson said danger to the Ogallala is low, with nature having provided the aquifer with a deep and effective filtering system of sand and rock. Pipelines and oil wells already dot the Ogallala landscape, Johnson said, and the existing Keystone pipeline has operated without serious incident.
Like oil-train accidents, pipeline incidents tend to be attention-grabbing, such as the one in Kalamazoo, Michigan, in 2010, when an oil pipeline broke and spilled almost 1 million gallons. Cleanup costs have approached $1 billion.
From 1994 through 2013, there were 2,715 significant pipeline incidents, according to the federal Pipeline & Hazardous Materials Safety Administration. That is an average of 136 a year, defined as causing death or hospitalization, incurring costs of more than $50,000, or erupting in fire or explosion. The incidents have caused 40 deaths and 132 injuries.
Joseph Schwieterman, a professor at Chicago’s DePaul University specializing in transportation, said perfect safety in the U.S. economy’s supply chain — train or pipeline or any other mode — is an unreasonable expectation.
“The accidents that happen are headline makers, but the risks are manageable,” he said. “The hype is out of proportion.”
Schwieterman also said there is a generational component to opinions on oil production and the transportation of its products.
“Oil invokes a negative, visceral reaction among young people,” Schwieterman said, acknowledging that high-profile troubles such as the 2010 BP Gulf Coast oil rig blowout has had the same effect on some people as the Exxon Valdez tanker spill in 1989.
“People tend to forget about the value of energy independence,” he said, “and that such independence will come at a certain price.”
The Omaha World-Herald Co. is owned by Berkshire Hathaway Inc.
Repost from The Wall Street Journal [Editor: A good summary of recent history and market players in the emergence and future of crude by rail. Interesting quote: “…if all the railcars loaded with crude on one day were hitched to a single locomotive, the resulting train would be about 29 miles long.” – RS]
Dangers Aside, Railways Reshape Crude Market
Shipping Crude by Rail Expands as New Pipelines Hit Headwinds and Train Companies Reap Revenue
By Russell Gold and Chester Dawson, Sept. 21, 2014
Railroad tank cars are filled with oil at the Musket Corp. Windsor Crude Terminal in Windsor, Colo. | Bloomberg
In May 2008, a locomotive with a grizzly bear painted on its side pulled into a railroad siding next to an abandoned grain elevator in the ghost town of Dore, N.D. The engine, property of the Yellowstone Valley Railroad, hitched up a couple of tank cars of crude from nearby oil wells and set off on a thousand-mile journey to Oklahoma.
Dore would never be the same—and neither would the U.S. energy industry. Until then, most oil pumped in North America moved around the continent in pipelines. Suddenly, and just as the oil industry began a period of unprecedented growth, there was an alternative: “crude by rail.”
Today, 1.6 million barrels of oil a day are riding the rails, close to 20% of the total pumped in the U.S., according to the Energy Information Administration, chugging across plains and over bridges, rumbling through cities and towns on their way to refineries on the coasts and along the Gulf of Mexico. If all the railcars loaded with crude on one day were hitched to a single locomotive, the resulting train would be about 29 miles long.
Initially conceived of as a stopgap measure until pipelines could be constructed, and plagued by high-profile safety problems, crude by rail has nevertheless become a permanent part of the nation’s energy infrastructure, experts say. Even pipeline companies have jumped into the rail business, building terminals to load and unload crude.
Behind the new industry are powerful economics. While it costs a bit more to ship petroleum on trains than through pipelines, railroads have the flexibility to deliver it to wherever it will fetch the highest prices. And capital expenses are far lower. Major railroads’ revenue for hauling crude has jumped from $25.8 million in 2008 to $2.15 billion in 2013, according to federal data.
The oil and rail industries have developed “a mutual dependence likely to continue for a long time,” said Ed Morse, global head of commodities research for Citigroup.
It is a similar story in Canada: the amount of crude moving by rail has quadrupled since 2012, and is forecast to more than triple between now and 2016.
The swift growth of crude by rail has been embraced by drillers in new oil fields in North Dakota, Texas and Colorado eager to move their product to the highest bidders. It was also welcomed, at least initially, by railroads looking for new customers after the recession sent traditional shipments tumbling.
But it has frightened communities across the country where first responders fear the fireballs that have erupted in the past year after some oil-train derailments. Federal regulators recently proposed new rules to require sturdier cars to carry oil, lower speed limits on some shipments and testing of the volatility of the crude transported by train.
Pipelines still carry most of the 8.5 million barrels of oil pumped every day in the U.S. And safety experts say pipelines have the best record of transporting crude without accident, despite a few big leaks like the one that left Mayflower, Ark., awash in heavy crude last year.
But pipelines, especially new pipelines, face a lot of problems these days. They draw protests from communities worried about spills and unhappy with the use of eminent domain to take rights of way from local landowners.
Activists opposed to the use of fossil fuels have focused on blocking pipelines in hopes of keeping oil in the ground. The Keystone XL pipeline, which requires federal approval because it crosses the U.S. border from Canada, has been seeking a permit since 2008 amid fierce political fighting, pro and con.
Railroads, by contrast, already own 140,000 miles of track in the U.S., according federal statistics, in a system that can send cargo from coast to coast, north to Canada and south to Mexico. By law, railroads don’t have the ability to turn down cargo, even if they want to, so all oil shippers had to do is to figure out how to get oil on and off the trains.
A big loading terminal might cost about $50 million—equal to the estimated cost of building just one mile of the Keystone pipeline.
With a terminal, “You can build it and have it under contract in 12 months and pay it off in five years,” said Steve Kean, president and chief operating officer of Kinder Morgan Inc., thtte operator of 80,000 miles of pipeline in North America and a growing network of rail terminals. The company has spent $290 million to date building up a crude-by-rail business.
To justify the massive investments needed for pipelines, their builders usually require drillers and refiners to sign long-term shipping contracts before they start laying pipe. That has been a problem for new oil fields without a track record, and for the mostly independent energy companies that developed those fields using hydraulic fracturing, said Adam Sieminski, who runs the federal government’s Energy Information Administration. Railroads don’t require such lengthy contracts.
The new way of moving crude was born out of frustration and need. In 2006, North Dakota faced what it called, in a report, a “crude oil transportation crisis.” Oil production was rising, but the few pipelines that served the state were full.
Enter Musket Corp., a privately held Houston company owned by the family that also owns Love’s Travel Stops & Country Stores. Musket bought inexpensive diesel from refineries along the Gulf Coast and moved it by rail to locations close to the Love’s service stations, developing and patenting a portable pump for loading and unloading the fuel.
In 2007, Musket tried using its pump to load a couple of tank cars with crude oil rather than diesel. When that worked, the company sent employees driving around North Dakota with binoculars to find an unused railroad siding to lease. They spotted Dore.
“Pretty soon, we knew it was going to be big,” said J.P. Fjeld-Hansen, a managing director of Musket. Trains could deliver Bakken crude to wherever it could fetch the highest prices, including Philadelphia, California, Louisiana or the giant Houston petrochemical complex.
The first loads from Dore were carried to Oklahoma, home to a giant oil-trading hub, by BNSF Railway Co., now owned by Berkshire Hathaway Inc. It picked up the cars from Yellowstone Valley Railroad, a so-called short line railroad that now operates on just one mile of track — specializing in hauling freight from shippers’ yards to connections with the bigger railroads. The company that owns the railroad, Watco Companies Inc., didn’t respond to requests for comment.
“Crude is a growing part of our business,” said Michael Treviño, a spokesman for BNSF, which now moves more oil than any other major North American railroad and spent $200 million last year on crude-by-rail projects.
The Dore project caught the attention of EOG Resources Inc., a big oil and gas company based in Houston. By the end of 2009, EOG had built an industrial-scale rail-loading terminal in Stanley, N.D., including a 1.3-mile loop of track where trains could be loaded with 60,000 barrels a day.
“We brought the project to fruition in an eight-month period,” Mark Papa, the former chairman of the company, said in a conference call with analysts in 2010. The company declined to comment.
The terminal cost $50 million, according to Wilson & Company Inc., an engineering firm involved in the project. Its chairman, Kenny Hancock, said his firm needed to work out kinks with this first-of-its-kind facility.
One problem was that when tank cars were loaded, hydrocarbon fumes would leak out and, since they were heavier than air, settle in the long open-ended loading shed. “The first seal we tried didn’t work and our explosive limit alarms went off,” he said. New seals and ventilation fans eventually solved the problem, the company said.
The relative ease and low cost of building loading and unloading terminals soon attracted a range of companies. Great Western Railroad, a Saskatchewan short line mostly owned by the province’s farmers in a cooperative agreement, hauled more carloads of crude last year than carloads of grain.
In 2011, Dakota Plains Holding Co. built a loading terminal, acquired a Utah tanning salon business that traded on the OTC Bulletin Board, renamed the business and issued shares to raise funds to expand.
There was also a surge in facilities for unloading oil and transferring it to refineries; such terminals are operating or planned in nearly two dozen states and Canadian provinces. Mile-long trains of oil tankers became familiar sights in cities across the country.
The crude-by-rail phenomenon has spread beyond the Bakken Shale in North Dakota and Montana to the Permian Basin in Texas, the Niobrara in Colorado and to western Canada. In July, Global Partners said they planned to build a rail terminal in the heart of the Gulf Coast petrochemical complex that can handle more than 100,000 barrels a day of crude, including Canadian oil sands.
“It is not a layup to build a pipeline to the Gulf Coast,” said Mark Romaine, chief operating officer of Global Partners, a Waltham, Mass., fuel logistics firm. “Look at the Keystone XL.”
But a year ago, those strings of black train cars took on an ominous look after an unattended oil train in Lac-Mégantic, Quebec, derailed and exploded, killing 47 people. Several other derailments were followed by fireballs as Bakken crude burst into towering flames.
Those accidents have given railroads second thoughts about hauling crude, said consultant Anthony Hatch. While companies don’t break out the data, hauling crude is believed to be very profitable for railroads, so “they were excited” at first, he said. But now that business, which makes up only about 3.5% of rail shipments, according to federal data, has attracted unwelcome attention in communities that previously ignored the freight trains rumbling through town. And even some of the largest North American railroads are concerned they might not survive the costs of cleanup and lawsuits if a train exploded in a crowded city.
Regulators are imposing new rules that industry executives fear could slow the entire rail system, cut capacity and cause congestion. Federal regulators recently concluded that Bakken oil contains a high level of combustible compounds, known as light ends, as The Wall Street Journal reported earlier this year. The U.S. Department of Transportation’s proposed new rules on crude by rail will require companies to test crude before putting it into appropriately sturdy tank cars, among other measures being imposed on the little-regulated industry.
Harold Hamm, chairman and chief executive of Continental Resources Inc., a leading exploration and production company in the Bakken, said that the problem isn’t with the oil, but with railroad safety. “There would not be any problems with oil movements in America as long as Mr. Buffett keeps the trains on the track,” said Mr. Hamm, referring to Warren Buffett, the chairman and chief executive of Berkshire Hathaway, the owner of BNSF.
Mr. Treviño, the BNSF spokesman, said that “the facts are that 99.997% of rail industry shipments of hazardous materials reach their destination without a release caused by a train accident,” and that BNSF had a lower percentage of derailments last year than anytime in company history.
Two BNSF trains were involved in a derailment near Casselton, N.D., in 2013 that released more than 400,000 gallons of crude and set off a several-story tall explosion, leading to the evacuation of 1,400 people from Casselton.
The Association of American Railroads said it has increased inspections, decreased speeds and is using more technology to prevent derailments.
But Mr. Hamm said he thinks the situation will be short lived. “Rail is still a temporary thing,” he said. “If rail hadn’t been available, there would have been pipelines built.”
And some are in the works. Enbridge Inc. recently received approval form North Dakota regulators to start construction on a $2.6 billion, 225,000-barrel a day and 600-mile project called the Sandpiper pipeline, which would move oil from Tioga, N.D., to Wisconsin.
In Dore, Musket says it isn’t worried about business drying up with the addition of pipelines. The company’s terminal in the town can now handle 60,000 barrels a day and employs 50 people; the company has built another rail-loading facility in Dickinson, a two-hour drive to the south, and one in the Niobrara Shale in Colorado.
“I don’t think it’s either/or,” Mr. Fjeld-Hansen said. “I think rail and pipe will coexist for a long time.”
—Betsy Morris and David George-Cosh contributed to this article.
