Oil companies relying more heavily on rail transport

April 24, 2014

For the past several years, there has been a heated debate by lawmakers in Washington, D.C. over the proposed Keystone XL Pipeline Project. The system, which would transport Canadian tar sand oil to ports in the United States, cannot be built without permission from the U.S. government—a decision that President Barack Obama has said will be made after the 2014 midterm elections.

The issue has pitted energy companies against environmentalists, and as often happens in debates, much of the nuance is being drowned out by proclamations from both sides. For instance, though the severity of arguments suggests otherwise, many Americans might not be aware that pipelines may not be the primary means of oil transport for long.

That job is increasingly being relegated to railways. To be sure, this is a recent development. According to an article in the New York Times, crude oil was barely transported by rail five years ago, but growth in the market for domestic oil and gas has sped up development.

"We never thought we competed with pipeline until four years ago when we moved our first unit train of crude by rail," Dean Wise, a vice president for BNSF Railway, based in Fort Worth, told the news source. "Now BNSF is moving eight trains a day."

Why rail? As usual, it all comes down to speed. Though transporting oil by rail costs a bit more—about $10 to $15 per barrel, according to the New York Times, while pipelines cost $5 per barrel—the journey is much quicker. For example, a train can take oil from the Bakken shale fields in North Dakota down to the Gulf Coast in about a week. The same journey takes more than a month when using a pipeline.

Trains are also more flexible. It's not always feasible to divert an entire pipeline somewhere else, but trains can always change their destinations as needed. Plus, there are nearly 140,000 miles of railroad in the U.S., which is almost three times as much as the 57,000 miles of pipeline. There are plenty of places where rail isn't just a better solution—it's the only solution.

Unfortunately, rail has some downsides. Derailments can lead to deadly accidents, such as the explosion that occurred in Lac-Mégantic, Quebec last summer, killing more than 40 people. Unlike pipelines, trains tend to travel through populated areas, increasing the level of risk.

"These things are firebombs on rail," Tom Smith, the Texas director of consumer advocacy group Public Citizen, told the news source. "They cross in the middle of urban areas and literally bisect small towns all over Texas, bringing the danger to our most populated areas."

Rail accidents can also lead to environmental disasters if oil leaks into water sources or other protected areas. In fact, federal data shows that more oil was spilled in 2013 alone than in the previous four decades.

It is clear that the economics of rail will keep it a primary method of oil transportation in the near future. Meanwhile, it is important for rail companies and other stakeholders to work with environmental consultants to ensure that their actions have as little impact on the environment as possible.