Buoyed by the unexpected success of crude by rail, companies are
beginning to consider transporting natural gas as remote drilling
frontiers emerge beyond the reach of pipelines, executives said.
Natural gas by rail is years away and likely to face strong public
resistance after a series of explosive crude-by-rail accidents. But
the potentially multibillion-dollar development could connect
gas-rich regions like North Dakota with urban centers, presenting an
opportunity for railroads, drillers and tank car makers already
cashing in from hauling oil on trains.
It could also be a cure for environmentally unfriendly flaring, a
growing problem in far-flung areas where more than $1 billion of
natural gas produced alongside oil is burned off each year for lack
of processing plants or pipelines that can take years to build.
"Everyone is talking about moving gas by rail," said David Demers,
chief executive officer of Westport Innovations, which is developing
technology for natural gas-powered locomotives. "They see this as a
large opportunity and have their pencils out to see how it could
Demers said Berkshire Hathaway's BNSF was one railroad considering
BNSF declined to comment on its plans, but a spokeswoman said it
would take time for any development of gas by rail.
Transporting gas by rail, most likely as cryogenic liquefied natural
gas (LNG), faces obstacles. The technology is in its infancy, and so
far no tank car is permitted to carry the fuel on U.S. rails. Nor
are there enough plants that convert natural gas to LNG to support a
robust gas-by-rail market, experts said.
More-volatile liquids like ethylene and propane already travel on
the rails in growing volumes. But as concerns about the safety of
crude by rail intensify, regulators are exercising extreme caution
with uncertified fuels like LNG, said executives involved in
developing the technology.
Stressing that it is too early to say, many of the major Class 1
railroads that have embraced crude by rail declined to speak about
specific plans for gas by rail. Calgary-based Canadian Pacific
Railway Ltd, for example, was just "monitoring any discussions in
this area," a spokesman said.
Breitling Energy Corp CEO Chris Faulkner said he and other gas
producers were discussing the idea, but his company was not
"I can only imagine the amount of pushback we're going to have on
transporting gas by rail," Faulkner said. "The discussion isn't
about safety and fact, it's about fear."
But as railroads team up with companies like General Electric Co and
Caterpillar Inc to develop technology to run locomotives on LNG,
many say that hauling the fuel as cargo is the next step as a
drilling revolution transforms North American energy markets.
"A LOT OF MONEY"
LNG, natural gas cooled and shrunk to a liquid for shipping, already
powers heavy-duty trucks and boats in the United States and Canada.
A network of fueling stations is cropping up with backing from the
likes of Royal Dutch Shell Plc and Clean Energy Fuels Corp.
Small-scale refrigeration plants that can turn gas to LNG are being
built in drilling regions to reduce gas flaring. In remote North
Dakota, one-third of the gas produced is flared.
Now, gas by rail is emerging as a possibility. Energy producers have
approached Jacksonville, Florida-based CSX Corp about moving LNG by
rail, said Louis Renjel, vice president of strategic infrastructure
initiatives, but the company has no plans to do so.
[to top of second column]
Westport Innovations has been approached about developing fuel
systems for tank cars that would haul LNG as cargo, according to
Paul Blomerus, director of the company's high horsepower sector.
"They make a lot of money transporting oil, so it would make sense"
to do the same with gas, Blomerus said.
BNSF is testing
LNG-powered locomotives and million-dollar tank cars that would hold
the fuel, the first step in a plan announced last year to wean
trains off costly diesel.
Regulators and railroads last year established a task force to
establish standards for LNG rail cars. A spokesman for the U.S.
Federal Railroad Administration said there was no specified deadline
for drafting actual rules.
Building these tank cars would be "a natural progression into
hauling LNG, similar to what we do with crude oil," said Ken
Webster, chief accounting officer at Chart Industries Inc.
Outside North America, steps have already been taken. Chart is
developing an LNG tank car in Germany in a joint venture with
Hamburg-based manufacturer VTG Aktiengesellschaft.
Japan Petroleum Exploration Co began transporting LNG by train in
2000 by loading specially designed tanks onto railcars, supplying
local distributors in regions beyond the reach of gas pipelines. The
company says the trains have proven cheaper than trucks in supplying
Crude by rail has been a lesson not just in how quickly a new
transport can emerge but also in the dangers.
An unmanned train carrying crude oil from North Dakota's Bakken
region exploded and killed 47 people in the center of the Canadian
town of Lac Megantic in July.
Among a string of other accidents, 21 oil tank cars on a BNSF train
caught fire after a crash in Casselton, North Dakota, in December.
As concerns grow, a movement against new crude train infrastructure
This has "paced" if not slowed progress in rail transport of fuels,
said Tina Donikowski, who heads a team developing gas-powered
locomotives at General Electric.
"The Federal Railroad Administration is being very cautious,"
Donikowski said. "They most definitely feel the extra pressure with
the problems of crude by rail."
(Reporting by Edward McAllister; Editing by Jessica Resnick-Ault and
Lisa Von Ahn)
[© 2014 Thomson Reuters. All rights
Copyright 2014 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.