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US Railways Consider Switching From Oil To Gas

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Fox News

BNSF Railway Co., one of the country’s biggest consumers of diesel fuel, plans this year to test using natural gas instead to power its locomotives. If successful, the experiment could weaken oil’s dominance as a transportation fuel and provide a new outlet for the glut of cheap natural gas in North America.

The surplus, spurred by new technologies that unlock the fuel from underground rock formations, has sent natural-gas prices plummeting. That has prompted industries from electric utilities to tugboat operators to switch to gas. If freight rail joins the parade, it would usher in one of the most sweeping changes to the railroad industry in decades.

“This could be a transformational event for our railroad,” BNSF Chief Executive Matt Rose said of the plan, which hasn’t been publicly announced. Shifting to natural gas would “rank right up there” with the industry’s historic transition away from steam engines last century, he said.

Freight railroads overwhelmingly are powered by diesel fuel refined from crude oil. BNSF, the largest railroad in the U.S., estimates it is the second-biggest user of diesel in the country, after the U.S. Navy.

A potential shift to gas faces many hurdles, however, including getting approval from federal regulators on fuel-tank safety. Introducing gas also will require different fuel depots, special tanker cars to carry the fuel and training for depot workers.

That won’t come cheaply. Just retrofitting a diesel locomotive and adding the tanker car could add 50% to a locomotive’s roughly $2 million price tag, though that increase would diminish as economies of scale take hold.

Mr. Rose said his company nevertheless would quickly move to a “retrofit of existing road locomotives’ if the pilot locomotives prove reliable. The pilot trains are expected to get rolling this fall in the hopes retrofitting could begin about a year later.

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Natural Gas Could Be Cheaper Way To Run A Railroad

 

On a 300-mile stretch of railroad in the plains of eastern Alberta, a test train chugs across the landscape burning a fuel that once made sense only to environmentalists.

It runs on natural gas. And today, that makes sense to business leaders whose top priority is cutting costs.

Over the last two weeks, train industry executives and others have been talking more about natural gas, as meetings in Houston and Chicago highlighted interest in a fuel that could slash one of railways’ top costs.

Representatives from major rail companies and related manufacturers met in private at a Houston hotel conference room last month to talk about how to push forward what could be the next great shift in train technology – a cataclysmic transition similar to the move decades ago from coal to diesel power.

Although rail companies have been coy in public about the potential of natural gas for locomotives, citing nascent technology and few real-world examples of gas-powered trains, they are exploring the option aggressively.

“The railroads would really like to be able to use natural gas in their locomotives. It’s a cost issue,” said Doug Longman, a researcher at the Argonne National Laboratory near Chicago who has worked on various diesel engine projects over 30 years.

Rising diesel prices pushed Union Pacific Railroad’s fuel and utilities costs to $3.6 billion last year, accounting for 26 percent of its overall expenses, according to filings with the U.S. Securities and Exchange Commission – up from 13 percent in 2001.

Diesel’s price has led railroads to invest in software and engine upgrades that can shave their total fuel usage, said Keith Schoonmaker, an analyst for Morningstar.

“Slight improvements do mean big savings for sure, but I don’t know what kind of cost savings would be available for natural gas,” Schoonmaker said.

Pennies add up fast

Railroad companies seem to believe natural gas prices are going to remain low and stable because of booming production of gas from shale plays, giving it a consistent price edge over diesel – which now sells for $1 to $2 more per gallon than an equivalent amount of natural gas. With industry leaders Union Pacific and BNSF Railway each consuming 1 billion gallons of diesel annually, even a difference of a few cents per gallon can mean tens of millions of dollars in savings.

But fuel costs aren’t the only consideration.

To switch to natural gas, railroads would have to modify diesel-electric locomotives at a cost today of $600,000 to $1 million each, said Normand Pellerin, assistant vice president for environment and sustainability for Canadian National Railways, which is running the test train in Alberta.

The conversion cost is expected to fall with increased application and interest from companies, Pellerin said.

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