Posts Tagged ‘pipelines’

Michigan Pipeline Closure Could Boost Railroads

March 16, 2021

The closing of a pipeline in Michigan has opened opportunities for railroads to pick up business shipping proponel by rail.

Michigan Gov. Gretchen Whitmer has taken action that could result in the Embridge Line 5 pipeline closing in May.

The closure follows Whitmer’s revoking the easement used by the 67-year-old pipeline through the Straits of Mackinac.

News reports indicated that propane suppliers that rely on the pipeline have begun to transition to receiving gas by rail.

Although some companies have already begun to switch to rail deliveries, for others it will be a costly process because they will need to build new rail sidings.

There is also the prospect of a shortage of rail cars as demand for rail deliveries rises.

Embridge is challenging the governor’s action and has said it won’t shut down the pipeline unless ordered to do so by a court.

Some suppliers have said they will not commit to receiving propane by rail until they see how the legal battle plays out.

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.

Increasing Pipeline Capacity Could Mean Bakken Crude Oil Trains Will be Gone After 2017

August 5, 2015

Tank car trains carrying crude oil through Northeast Ohio may seem ubiquitous today, but they might be gone by 2017 if an analysis conducted by a Houston-based consulting firm comes true.

RBN Energy LLC made the prediction on its blog and it was picked up by Railway Age.

Increasing pipeline capacity combined with falling crude oil prices has depressed the level of Bakken crude oil being shipped by rail.

The falling prices have reduced the price differences between international and domestic sources of crude oil.

“Since 2012 a combination of rail and pipeline has given Bakken producers ample crude takeaway capacity but pipelines alone have not had sufficient capacity on their own,” said RBN’s Rusty Braziel in an interview with Railway Age. “However, with production slowing down, pipeline capacity is catching up and by 2017 there should be enough pipelines to carry all North Dakota’s crude to market.”

But Sandy Fielden, the author of the blog post, said the situation is more complicated than that.

“ . . . just because pipeline capacity is available doesn’t necessarily mean producers will prefer to use that capacity instead of rail,” Fielden wrote. “In the long run – assuming that they do not have other overriding obligations – shippers will look to their crude netbacks at the wellhead to decide where and how to send their crude to market. That means they should favor market locations where the combination of crude sales price less transport is the highest – regardless of transport mode.”

Fielden, who is RBN’s director of energy analytics, wrote that wide price differences between North Dakota Baaken crude oil and crude from overseas made rail the ideal option for producers sending it to the East or West Coast because there was no pipeline capacity in those regions.

“As soon as price differentials—especially between domestic benchmark West Texas Intermediate and international benchmark Brent—narrowed, then barrels shifted back to pipelines to take advantage of their cheaper tariff rates,” Fielden wrote. “Yet significant crude volumes continued to be transported to market from North Dakota by rail because pipeline capacity could not handle the demand.”

But more pipelines have been built or are being planned in North Dakota that would provide space for all the barrels currently traveling to market from North Dakota by rail.

Fielden’s analysis found that new pipeline projects due to go into service during 2016 and 2017 will expand Bakken takeaway pipeline capacity by 680,000 barrels per day.

Another 100,000 barrels per day of pipeline capacity would come online in 2019 if the TransCanada Keystone XL pipeline is completed, with 220,000 barrels per day more in 2020 if the TransCanada Energy East project is built.