The boom in oil and natural gas drilling from shale means the nation's railroads are handling more unit trains of crude oil and shipments of sand used in hydraulic fracturing, a vice president for BNSF Railway Co. said Tuesday.
Dean Wise, vice president of network strategy for the Fort Worth, Texas-based railroad, said his company also launched a pilot project to study locomotives powered by liquefied natural gas. It's still early, but the effort could put a dent in BNSF's $4 billion annual bill for diesel fuel.
Railroads carry freight for all sectors of the economy, handling shipments of grain and coal to automobiles and building materials, he said. BNSF operates more than 32,500 route miles in 28 states and two Canadian provinces.
“Many of you might think of railroads as a nostalgia play,” said Wise, who spoke to the Rotary Club of Oklahoma City. “But we are now the heart of the U.S. supply chain.”
On a ton-per-mile basis, railroads carry 43 percent of the nation's good and commodities, with trucking at 31 percent. They are followed by waterways and pipelines, both at 13 percent. Wise said freight transportation costs amount to 8.5 percent of the nation's gross domestic product. That compares favorably to China, where freight transportation costs take up 22 percent of the country's GDP.
Railroads are now competing directly with pipelines for crude oil shipments. Part of that is a result of the rapid growth of the Bakken tight oil formation in North Dakota. Wise said a typical unit train has 100 to 120 cars of crude, which he called “rolling pipeline.”
“Four years ago, the railroads handled virtually no crude by rail,” Wise said. “This year, BNSF alone will be handling 600,000 barrels of crude a day by rail, which is a huge change for us. The pipeline capacity can't grow fast enough given the new shale plays, so we're in there as a good option and faster to market for the producers.”
Sand used in the mix for hydraulic fracturing also is being shipped by railroads, Wise said.
“We're moving sand 1,000 to 1,500 miles into areas with shale activity, but there's competition with ceramic sand being imported from China,” Wise said.
Wise said BNSF is working with General Electric Co. and Caterpillar Inc. on locomotives powered by liquefied natural gas. Among the hurdles are future federal environmental regulations on emissions from LNG locomotives and the safety implications of hauling a separate refrigerated tender car for the fuel.
“It's a huge investment to do that, and there's a bunch of technical issues we're going to be figuring out,” Wise said.
In Oklahoma, BNSF has 1,236 employees and operates 1,400 miles of track. It has rail yards in Oklahoma City, Tulsa, Enid and Madill. The company plans to spend $125 million for maintenance and rail expansion projects in the state this year.
“Forty-five percent of our units move from, to, or through Oklahoma,” Wise said. “That's a stunning amount of volume for one state, so you're very important to our network, and we see more opportunities as we go forward.”
Wise fielded questions about train safety and quiet-zones in urban areas. He said BNSF recorded its safest year in 2012, with 2 incidents per million miles of travel. Funding for a quiet zone for downtown Oklahoma City is up to local officials, he said. Costs can range from $300,000 to $1 million.
“We have to blow the whistle by law,” Wise said. “It's a federal safety mandate. If you don't want us to blow the whistle, there's something called a quiet zone, an FRA (Federal Railroad Administration) specified set of risk management around a grade crossing that increases the safety of that grade crossing so that we don't have to blow the whistle.”