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.