Without Keystone XL Pipeline, Railroads See Boom Time from Bakken
Thursday, November 24, 2011 - 10:45 AM
(Billings, MT – YPR) – Railroads are benefiting from the drilling boom in the Bakken Oil Formation. The region encompasses southern Canada bordering portions of Eastern Montana and Western North Dakota.
Denis Smith is vice president of marketing for industrial products for Burlington Northern Santa Fe Railway (BNSF). He says railroads have a long history of hauling crude petroleum, including from the Bakken, “but at this scale and at this volume, that’s what makes it unique and different and very exciting,” he says.
Smith says BNSF’s increase in traffic isn't just from hauling crude petroleum from the oil wells in the Bakken and surrounding Williston Basin. He says these wells also need deliveries of drilling supplies like sand, pipe, and other heavy materials. He says the shortage of semi trucks and drivers and the current lack of pipeline capacity means companies are turning to railroads.
He says to accommodate the increase of drilling activity, BNSF has been laying new sections of track for its customers from its main line to the terminals to accommodate these shipments.
“So if anyone is spending a lot of money right here, right now on track and capacity it’s the customer,” Smith says. He says customers are also having to buy rail cars.
TransCanada has proposed building the Keystone X-L pipeline that is to originate at the tar sand oil fields in Alberta Canada and extend to refineries and distribution terminals along the Gulf Coast in Texas. The pipeline was also expected to pick up crude from the Bakken.
The Obama Administration announced earlier this month a decision on a permit will be delayed as the U.S. State Department considers an alternate pipeline route. Originally, a decision was anticipated by the end of 2011.
In the meantime, Smith says oil companies continue to rely on rail to transport crude to market. Even if the Keystone X-L project is approved and permitted, it will take time to construct the nearly 2,000 mile long pipeline. “Rail is the most immediate and quickest way to get the oil to the marketplace at the moment,” Smith says.
He adds rail is also more flexible. He says a pipeline is point-to-point while BNSF transports crude to multiple locations from the Bakken. This includes to refineries and distribution and storage terminals in Oklahoma, Texas, Louisiana, California, and to the East Coast.
That’s why Smith says BNSF expects to have a continued role in the Bakken even if the Keystone X-L pipeline is approved and operating.
“Theoretically, technically, mathematically it will take away a lot more barrels than are currently going, but we feel that on the rail-side we’ll have a solid 20-25 percent of the daily production up there (Bakken) move by rail,” he says.
BNSF is not the only railroad that’s seeing an increase in its rail traffic. The Calgary Herald reports Canadian Pacific is also increasing its investment because of the Bakken oil boom, as are other rail lines.