(Repeats story originally published overnight)
By Edward McAllister
NEW YORK, June 16 As politicians debate the
dangers of a massive increase in oil carried by rail in North
America, railroads and energy producers are considering the same
for natural gas.
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,
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 work."
Demers said Berkshire Hathaway's BNSF was one
railroad considering the move.
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 considering it.
"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.
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
"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 LNG.
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,
As concerns grow, a movement against new crude train
infrastructure has emerged.
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)