Quotulatiousness

December 31, 2012

Railroads see traffic boom as pipelines are delayed

Filed under: Business, Economics, Railways, USA — Tags: , — Nicholas Russon @ 12:53

The increase in railroad traffic from handling shipments of shale oil is having a very positive effect on the rail companies’ bottom lines:

Energy companies behind the oil boom on the Northern Plains are increasingly turning to an industrial-age workhorse — the locomotive — to move their crude to refineries across the U.S., as plans for new pipelines stall and existing lines can’t keep up with demand.

Delivering oil thousands of miles by rail from the heartland to refineries on the East, West and Gulf coasts costs more, but it can mean increased profits — up to $10 or more a barrel — because of higher oil prices on the coasts. That works out to roughly $700,000 per train.

The parade of mile-long trains carrying hazardous material out of North Dakota and Montana and across the country has experts and federal regulators concerned. Rail transport is less safe than pipelines, they say, and the proliferation of oil trains raises the risk of a major derailment and spill.

Since 2009, the number of train cars carrying crude hauled by major railroads has jumped from about 10,000 a year to a projected 200,000 in 2012. Much of it has been in the Northern Plains’ Bakken crude patch, but companies say oil trains are rolling or will be soon from Texas, Colorado and western Canada.

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