BNSF Considering Switch From Diesel To Natural Gas

BNSF Railway Company plans to test using natural gas to power its locomotives instead. BNSF is one of the biggest U.S. consumers of diesel fuel. If successful, the experiment could weaken oil's dominance as a transportation fuel and provide a new outlet for the glut of cheap natural gas in North America.



Warren Buffett

Freight railroads overwhelmingly are powered by diesel fuel refined from crude oil. BNSF, the largest railroad in the U.S., estimates it is the second-biggest user of diesel in the country, after the U.S. Navy.

 

A potential shift to gas faces many hurdles, however, including getting approval from federal regulators on fuel-tank safety. Introducing gas also will require different fuel depots, special tanker cars to carry the fuel and training for depot workers. That won't come cheaply. Just retrofitting a diesel locomotive and adding the tanker car could add 50% to a locomotive's roughly $2 million price tag.

A gallon of diesel fuel cost an average of $3.97 last year, according to federal statistics. The equivalent amount of energy in natural gas cost 48 cents at industrial prices.

BNSF also faces sizable upfront costs to retrofit even a portion of its roughly 6,900 existing locomotives. BNSF is working with manufacturers to develop a locomotive that can run on diesel and gas, which could lower fuel costs and help meet federal air-pollution standards that take effect in two years.

The new locomotives, which use liquefied natural gas, are being developed by units of General Electric Company and Catepillar, Inc.  Preliminary tests indicated that LNG-powered trains could go farther before refueling than diesel trains and have comparable towing power.

Like municipal bus fleets, which have converted to engines running on compressed natural gas in Los Angeles and other U.S. cities, trains are easier to fuel than other modes of transportation because they repeatedly travel on fixed routes. That makes it less cumbersome to build enough fueling depots. Compressed natural gas is similar to LNG, but requires a different fuel tank and engine.

Natural gas faces higher obstacles to penetrate the nation's biggest diesel-fuel market: long-distance trucks. They are by far the largest consumers of diesel in the U.S. and there has been considerable interest in converting them to run on natural gas. But truck routes can vary and finding enough refueling stations has been a problem.

Royal Dutch Shell is completing plans to produce liquefied natural gas in Louisiana and Ontario and supply it to as many as 200 truck stops in the U.S., adding to a small, but growing, network of natural-gas fueling stations.

Canadian National Railway has retrofitted two locomotives to run on a mixture of 90% LNG and 10% diesel.

But there are compelling reasons for railroads to ponder the switch, including new Environmental Protection Agency air-pollution standards for railroads that will likely require railroads to add expensive emissions-control equipment to new diesel locomotives in 2015.

While railroads consume only 6% of diesel burned in the U.S., according to the federal government, some experts believe BNSF's decision to try using gas could have a large psychological impact on energy markets. (WSJ, 3/5/2013)