Posts Tagged ‘crude oil by rail’

Railroads May Benefit From Biden Pipeline Opposition

February 3, 2021

North American railroads might benefit from plans by the Biden administration to halt or curtail construction of crude oil pipelines.

Canadian National CEO Jean-Jacques Ruest said Biden’s actions, included cancelling a permit for the Keystone XL pipeline that was being built from Canada into the United States will have a positive effect on railroads.

The Keystone pipeline is designed to carry oil sands crude from Canada to refineries in the United States. 

Ruest said it would have been a few years before the Keystone pipe had been completed.

“So I think the positive impact on us might be a few years down the line,” Ruest said.

Canadian Pacific CEO Keith Creel said the actions being taken by the Biden administration in reviewing pipelines bodes well for railroads.

However both CEOs said that conventional crude oil by rail shipments will eventually shift to pipelines once capacity matches demand. 

Some crude oil cannot flow though pipelines and thus moves by rail.

In recent years the volume of crude moving by rail has diminished due to a collapse in energy prices.

Canadian authorities reported that between April and November last year Canadian crude-by-rail exports to the U.S. fell 70 percent.

Some existing pipelines and some in the building or planning stages carry Bakken crude oil from North Dakota.

If some of those projects are shut down that could net railroad more crude by rail business.

Pipeline Closure May Help Rails

July 7, 2020

A federal judge has ordered a pipeline carrying North Dakota crude oil to be shut down for a year while the line undergoes an environmental review.

The pipeline closure is seen as a potential boon to moving crude oil by rail.

The pipeline is the largest serving the Bakken shale basin and links a terminal in Patoka, Illinois, about 75 miles east of St. Louis.

The pipeline has a capacity of 557,000 barrels a day or the equivalent of seven to eight crude oil trains.

Industry observers said that although some oil could be diverted to rail shipment, other pipelines are capable of picking up the oil sent via the closed pipeline, which is owned by Energy Transfer.

Approximately 36 percent of the North American tank car fleet is in storage. Some believe that a barrier to moving more crude by rail could be lack of operating crews due to recent furloughs by railroads.

CP Crude Oil Traffic Could Fall to Zero, Use of Tank Cars for Crude Oil Storage Seen as Unlikely

April 22, 2020

Despite initial opposition, U.S. railroads may be at least taking a look at allowing oil companies to use tank cars for storage.

However, Cowen & Company Freight Transportation Analyst Matt Elkott told Railway Age that Canadian National and Canadian Pacific don’t want that business because any revenue gained would not outweigh the potential financial liability.

Elkott said tank cars would in theory be used to store at least 25 million barrels of crude oil.

The crude oil by rail market has fallen during a global conflict between Russia and Saudi Arabia over production levels and pricing that has sent the price of barrel of crude plunging.

There is no evidence yet, Elkott said, that crude oil is being stored in tank cars and he said that for now it seems unlikely that it will happen.

Elkott said U.S. railroads have largely been silent on the prospect of storing crude oil in tank cars which might mean they are more open to it than their Canadian counterparts.

Aside from regulatory and liability concerns, railroads might oppose storage of crude oil in tank cars because it would accelerate corrosion of those cars.

In an unrelated development, the decline in crude oil prices could lead CP’s oil transport traffic to fall to zero or near zero.

The carrier hauled a record 36,000-plus carloads of crude in the first quarter of 2020, but the economic downturn triggered in part by the COVID-19 pandemic combined with falling oil futures has led CP to project a steep drop in crude oil traffic.

Oil futures fell below $0 a barrel on Monday although production has not fallen as fast as demand.

CP expects a double-digit decline in crude oil volume in the second quarter.

Crude oil extracted in Alberta and the Bakken region of North Dakota is placed in unit trains that CP interchanges with all U.S. Class 1 railroads for shipment to refineries.

Tank Trains Routed Off Ft. Wayne Line

April 13, 2020

Norfolk Southern earlier this month began routing crude oil and ethanol trains off the Fort Wayne Line in favor of other routes that will take them through Cleveland.

An online report indicated that NS rerouted the trains to avoid making trackage rights payments to the Chicago, Fort Wayne & Eastern, which operates the Fort Wayne Line in northern Indiana and western Ohio.

NS also said it wanted to solve crew balancing problems with the divergence of loaded and empty routings.

The tank car trains began using the Fort Wayne line around 2014 when congestion on the Chicago Line brought traffic to a near standstill at times.

The trains used the CF&E to and from Chicago via Fort Wayne, Indiana.

These trains sometimes operated with motive power from the originating railroad, hence the need to have an NS lead unit equipped with cab signals for travel east of Cleveland.

The current operating plan is to route the tank car trains via Bellevue where they will receive locomotives equipped with cab signals.

Between Chicago and Bellevue, these trains can be routed either via Fort Wayne on the former Nickel Plate Road mainline or to Toledo on the Chicago and thence to Bellevue on the Toledo District via Oak Harbor and Fremont.

After receiving a cab signal equipped locomotive in Bellevue, the tanker trains will operate on the former NKP to Vermillion and take the connection to the Chicago Line.

It is thought that trains leaving Chicago with solid NS motive power consist can take the Chicago Line between Chicago and Cleveland.

The empty tank cars will operate on the reverse routes via Bellevue.

In the past, eastbound tank car trains using the Chicago Line have sometimes added cab signal equipped NS units at Berea siding or near Rockport Yard in Cleveland.

This practice is expected to continue if Bellevue lacks a cab signal equipped unit for a particular train.

The Fort Wayne Line was at one time the former Pennsylvania Railroad mainline between Chicago and Pittsburgh. It runs in Ohio through Bucyrus, Crestline, Mansfield, Wooster, Orrville, Massillon and Canton.

East of Alliance, the Fort Wayne Line is a busy railroad handling NS traffic off the Chicago Line at Cleveland that is bound for Pittsburgh and points east.

West of Alliance the Fort Wayne Line has far less traffic, including manifest freights that operate Conway Yard-Bellevue and Conway Yard-Chattanooga, Tennsessee. There is also a local between Canton and Mansfield.

Trains affected include the 66R, 66X and 66Z, which traditionally have originated on, respectively, Canadian National, Canadian Pacific and BNSF.

Refinery Closing to Cut CSX Crude Oil Traffic

June 28, 2019

CSX is expected to seen a drop in crude oil traffic following the closure of refinery near Philadelphia that sustained a massive fire last week.

The Philadelphia Energy Solutions refinery along the Schuykill River will be shut down by its owner. It is the largest refinery on the East Coast.

Some of the crude oil processed at the refinery originated in the Bakken oil field region of North Dakota on BNSF and was interchanged to CSX in Chicago.

The refinery was built in the 19th century and had a capacity of two 120-car unit trains per day, which would represent 40 percent of the refinery’s capacity of 335,000 barrels per day.

The rail unloading facility at the refinery was rebuilt in 2013 with financial help from the state.

In a statement, Philadelphia Energy Solutions said the damage caused by the fire “has made it impossible for us to continue operations.”

Trains magazine reported that some energy analysts said the refinery had slim slim profit margins and its closing is not surprising.

Kentucky Company Shipping Crude Oil by Rail

August 26, 2016

A Kentucky company has begun shipping crude oil by rail from the Somerset Rail Park in Ferguson, Kentucky.

KentuckyContinental Refining company said in a news release that it began shipping via Norfolk Southern from the 34-acre truck-to-rail trans-loading facility in order to expand its national distribution more efficiently.

“We now have the added advantage in our region of shipping products farther and reducing costs, while utilizing a new resource,” said CRC President and Chief Executive Officer Demetrios Haseotes in a statement.

The Somerset-based Continental began using the rail park on July 27 to bring in gasoline components for gasoline pool blending. It also buys trans-mix fuel and ships it by rail.

It said it hopes to continue procuring additional blending components in the future.

Rail Crude Oil Shipments Down 45%

August 4, 2016

Crude oil shipments by rail fell 45 percent in the first five months of 2016 when compared with the same period in 2015.

The U.S. Department of Energy said crude oil shipments averaged 443,000 barrels per day this year.

train image2About half of the decline was due to fewer shipments of crude oil from the Midwest to the East Coast.

The DOE said crude oil shipments by rail have been in decline since summer 2015 due to a narrowing of price differences between domestic and imported crude oil, the opening of new crude oil pipelines, and declining production in the Midwest and Gulf Coast on-shore regions.

In a report, the department said the economics of crude-by-rail transportation depend on the relationship between the prices of domestic and international crude oils.

Domestic crude oil priced in the Midwest and western Texas are no longer heavily discounted relative to imported crude oils priced in the North Sea.

DOE said the narrower the spread between domestic and imported crude oils, the more likely that coastal refiners will choose imported crude oil rather than domestic supplies shipped by rail.

Although it suffered the largest fall, the market for Midwest crude oil to the East Coast remains the largest in the U.S., accounting for 176,000 barrels per day or 45 percent of the total crude oil moved by rail within the United States in May 2016.

Crude Oil by Rail Fell in 1st Quarter

May 16, 2016

Crude oil shipments continued to decline during the first quarter of 2016 the Association of American Railroads said.

AARU.S. Class I railroads originated just over 63,000 oil loads, which was a drop of 25.5 percent from the fourth quarter of 2015 and 44.1 percent from the first quarter of 2015.

AAR said the falling crude oil traffic was due to an oversupply of crude oil, coupled with less demand and a strong U.S. dollar.

Chasing an Oil Train Down the C&P

April 18, 2016

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This past Saturday I chased an oil train from Alliance to Rochester, Pennsylvania, on the Old C&P via Yellow Creek, Ohio

Even though it had a Norfolk Southern cab signal equipped engine, the 64R was routed down the old line from Alliance.

Our first stop was at Homeworth where a double concrete arch bridge crosses a road and creek.

Next was Summitville at the top of the grade. We got it at Salineville (not pictured) and then again at Yellow Creek.

While waiting at Yellow Creek some ATV and dirt bike riders provided some entertainment.

From Yellow Creek which is the junction of the line to Mingo Junction it turned east to head for Conway.

Article and photographs by Todd Dillon

Crude Oil by Rail Also Faces Tough Future

March 14, 2016

Much has been made about falling coal production in the eastern United States and its adverse effect on railroad traffic, yet the shipment of crude oil by rail is also facing a tough future.

Crude oil production in the Niobrara shale region of Colorado and Wyoming is in decline, having peaked in April 2015 and a report by RBN Energy LLC analyst Sandy Fielden predicts that pipelines are going to rob rail of a significant amount of crude oil from that region which now moves by rail.

train image2An Energy Information Administration forecast said that falling crude oil prices and lower drilling activity has meant that crude production in the Niobrara shale region is likely to fall to 388 million barrels a day through March 2016. Peak production in April 2015 was 491 Mb/d.

Fielden told Railway Age magazine that midstream companies continue to add pipeline capacity in the region, which is causing a diversion of crude oil away from rail.

Rail shipments of crude oil peaked in December 2014, but Fielden said that rail terminals to handle crude oil continue to be built.

Fielden has published a report titled Slow Train Coming – Terminal Projects Still Being Built As Rockies Crude-By-Rail Fades that says that crude oil by rail volumes are falling across the United States and Canada.

“The decline is mostly in response to narrower spreads between U.S. domestic crude benchmark West Texas Intermediate and international equivalent Brent,” Fielden wrote. “The lower the spread between these two, the lower the incentive to move crude from inland basins to coastal refineries by rail because the latter is a more expensive transport option compared to pipelines.”

After Congress last December lifted regulations that limited U.S. crude oil exports, West Texas Intermediate crude began to trade at a slight premium to Brent crude, which averaged $0.26/Bbl in January.

Fielden said that the narrowing of prices between West Texas Intermediate and Brent resulted in crude oil by rail volumes in the United States falling by 20 percent between November 2015 and January 2016.

However, Fielden said the decline was slower than expected because shippers and refiners continue to rely on rail to move crude oil out of the Bakken region of North Dakota. This may be, in part, because shippers and refiners have investments in rail infrastructure and because some routes still do not have pipeline access.

Most of the oil being moved out of the Niobrara region by rail is bound for the Gulf Coast, where more than half of the U.S. refinery capacity is located.

Just 20 percent of Niobara region oil was shipped by rail to the East Coast in 2014, a figure that fell to 17 percent in 2015.

In the meantime, construction of new rail loading terminals continues in Wyoming and Colorado.

Fielden’s report said those facilities were planned before the price of oil fell and probably reflect a belief that crude oil by rail will still have a role to play in the longer-term development of Rockies crude takeaway capacity.