North America - Oil Transport By Rail

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Re: North America - Oil Transport By Rail

Postby Gilbert B Norman » Tue Jan 24, 2017 1:38 pm

Time to scratch the thought that the railroad industry has a "Friend in the White House":

http://nytimes.com/2017/01/24/us/politi ... trump.html

Fair Use:

...WASHINGTON — President Trump moved assertively on Tuesday to further dismantle his predecessor’s policies as he revived the Keystone XL pipeline that stirred years of debate over the balance between the nation’s energy needs and efforts to stem climate change.

Former President Barack Obama rejected the proposed 1,179-mile pipeline in 2015, arguing that it would undercut American leadership in curbing the reliance on carbon energy. Mr. Trump signed a document clearing the way to government approval of the pipeline as well as for the Dakota Access pipeline in North Dakota..


The action was expected, and Obama's opposition to these pipelines was more for environmental interests than railroad. But if somehow anyone thought that the President would be responsive to railroad interests, time to stow that thought away for the next four or eight years.
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Re: North America - Oil Transport By Rail

Postby gokeefe » Tue Jan 24, 2017 1:54 pm

I'm not convinced that this indicates responsiveness (or lack thereof) to the railroads.
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Re: North America - Oil Transport By Rail

Postby MCL1981 » Thu Jan 26, 2017 8:17 am

Using a better, faster, more efficient, and safer method of moving hazardous chemicals is not "anti-railroad". It is common sense and has absolutely NOTHING to do with being for or against trains. And given that the rail industry is heavily American built with American workers, owned by American businesses, I'd say you do have a friend in the white house. Not every decision about everything in this country revolves around you and your train.
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Re: North America - Oil Transport By Rail

Postby Gilbert B Norman » Fri Jan 27, 2017 11:23 am

MCL1981 wrote:Not every decision about everything in this country revolves around you and your train.


Mr. MCL, possibly I am guilty of stirring up something where nothing was intended, but I like to think we gather at this site to promote the industry to which we all have our "attachments" - be they hobbyist, investor, shipper, traveler, or employee. But I hold that to promote the building of a pipeline to transport petroleum products displacing rail transport is contrary to railroad interests. So have other initiatives proposed by the Administration, such as withdrawing from several trade agreements and the imposition of tariffs on imported goods.

Coming to mind are thoughts on how each of the seven Class I roads will be adversely affect by Administration proposals one week into office. Let's just go "round the room":

BNSF - Warren cast his chips with another candidate, and the incumbent is going to "make him pay". Excepting the short term benefit from handling pipe and construction equipment, running the two pipelines - XL and Dakota Access - through the Bakken region will take direct aim at BNSF's "king of the hill" standing handling petroleum products. BNSF also serves the Powder River coal reserves and handles such both East and West. Withdrawal from existing trade agreements can only hurt traffic at major West Coast and Gulf ports served by BNSF.

CSX - Chessie's fur will be badly ruffled as well. Aside from handling oil and coal in interchange, it is evident already that its on-line coal Appalachian traffic is being "mauled". While, I have been skeptical about the wisdom of the East Coast maritime ports expecting the "bonanza" of Neo-PANAMAX traffic (I'll be in Miami next week; hope to see a few less cranes pointing skyward), the trade initiatives will only make such "doubled in Spades" (bridge players around here; note I avoided "doubled in NT").

GT (CN USA lines) - Much the same as outlined for KCS, except that "neighbor to the North does not appear to be in the X-hair as that to the South.

KCS - Here is the road that is going to be "clobbered" (merger, anyone?); their entire business plan has been built around increased trade between the US and Mexico. Think of all the high-rated goods (autos, appliances) as well as agriculture that stand to be affected under the trade "newthink". There goes any hope of developing Lazaro Cardenas into a world class West Coast port offering lower wage costs to maritime shippers - and to KCS(M) as the only road serving such.

NS - "ditto" CSX

SOO - (CP USA lines) They are just behind BNSF in being "whacked" by XL and Dakota Access pipeline initiatives. Also less agriculture imported from Canada.

UP - While not as vested in the handling of oil as in BNSF and CP, they too made investments in the Mexican rail system. UP is equally, if not more, vested in Powder River coal, and, while not having the "high speed" (as freight goes) Transcon, they do handle much traffic from the West Coast ports. They are more vested in the Gulf ports than BNSF.

I guess I should close with the necessary disclaimer: author holds long position UNP
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Re: North America - Oil Transport By Rail

Postby Gilbert B Norman » Sat Mar 25, 2017 6:46 am

As I'm sure was expected by the railroad community, President Trump has to 'salvage something" from likely his worst day in office to date (Health Care reform going down for the count) by approving the Keystone XL pipeline project. That he could do by EXO just as he did earlier with Dakota Access.

Short term of course will be a "pickup" for rail business as it will be for good paying construction jobs; immediately preceding I set forth my thoughts as who will be the most adversely affected. Anyone else care to "step up to the plate"?
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Re: North America - Oil Transport By Rail

Postby SemperFidelis » Sat Mar 25, 2017 9:50 am

Funny how Executive Orders are now such wonderful things, when a few months ago they were tantamount to unConstitutional and treasonous behavior.

Not directed at anyone. In one way or another I am sure we are all hypocrites. I know for certain I am now and again. :-)
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Re: North America - Oil Transport By Rail

Postby gokeefe » Sat Mar 25, 2017 10:29 pm

I think the greatest adverse impact remains on railroads with major coal interests, particularly thermal grades for power.

Although UP and BNSF both have a lot of coal business their primary product is low sulfur Powder River Basin coal. The low sulfur content makes Powder River coal highly competitive for export especially as emissions standards continue to tighten in Asia.

Dakota Access will also indirectly support a continued domestic surplus of natural gas, leaving coal as an economically inefficient heat source for power generation for decades to come.

The simultaneous collapse of bituminous Appalachian coal exports and eastern coal fired power generation has fundamentally negative implications for one railroad in particular: Norfolk Southern.

Coal exports from Lambert's Point are one of the single largest sources of traffic for the railroad alongside coal supply to power plants throughout the Southeast, Midwest and Northeast. Although CSX is likewise affected their lesser exposure to coal exports and stronger intermodal traffic make them better positioned to survive the continued decline of coal.
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Re: North America - Oil Transport By Rail

Postby Gilbert B Norman » Thu May 25, 2017 7:39 pm

Quite an optimistic article appearing today in The Journal:

http://www.wsj.com/articles/how-america ... 1495618203

Paywall comes down after a few days, but in meantime, Fair Use quotation:

...VIENNA—OPEC’s back is against the wall and U.S. oil producers put it there.

The Organization of the Petroleum Exporting Countries and a coalition of other countries including Russia are poised to curtail oil production for at least another nine months when they meet here Thursday.

The truth is, OPEC has little choice but to extend the cuts initially approved in November to ease a global glut. It bet U.S. shale drillers would be too weak to step in and fill the void.

It was wrong.

Even though Keystone XL and Dakota Access have been cleared by "T-45", they are not yet up and running. Railroads still have a chance to show the petroleum producing community that they "can get the act together" regarding safety issues and that, factoring capital costs of a pipeline, they can do the job economically and minimize further pipeline projects.

disclaimer: author is Long UNP; likely has less of their traffic "mix" dependent upon crude than the other Class I 's
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Re: North America - Oil Transport By Rail

Postby gokeefe » Thu May 25, 2017 8:21 pm

I would be interested to know the status or timeline of the tank car regulations and the pace of fleet replacement.
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Re: North America - Oil Transport By Rail

Postby Gilbert B Norman » Thu May 25, 2017 8:30 pm

Mr. O'Keefe, if the roads intend to be competitive in the market, best get that act together. DOT-111's won't cut it in this environmentally conscious age.

I would like to see the roads become a primary and permanent player in handling this traffic, and not just some kind of interim until the pipelines are laid. Even though I know your primary focus towards the industry is passenger, I hope you will join me in this thought.
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Re: North America - Oil Transport By Rail

Postby gokeefe » Thu May 25, 2017 10:17 pm

Mr. Norman,

I most certainly want to see the railroads succeed in moving freight both close to home and across the nation. In Maine there are many places which will never ever see a return of passenger trains but which are totally dependent on good freight rail service. It's hard to express how pleased I've been to see Poland Spring water finally moving by rail. It could not have happened at a better time.

The good news for the railroads is that shale oil is not quite consistent enough to justify the construction of pipelines that would fully absorb production. I feel confident that oil by rail is here that stay. Rail with it's "on - off" capability is actually a critical piece of the swing production tendencies of shale. The railroads can absorb and deliver a production glut when it happens and store the cars when it falls off. That is the stuff that migraines are made of in OPEC member (or associated) states.

I would opine that at this point that the freight rail infrastructure (terminals, tank cars and main lines) that can move crude oil is actually of greater value than the entire Strategic Petroleum Reserve. Without it shale oil would probably have remained a second tier crude production source.

Here's a final thought ... Shale oil is valuable for all of the above reasons but perhaps the biggest reason of them all is the chemical profile of the crude itself. It's very light, easily produces gasoline and also has enormous amounts of associated natural gas. Just imagine the controversy if this source was like the Venezuelan Orinoco grade, heavy and full of sulfur. We would have a diesel glut and not as many refineries that would be capable of handling it. Shale crude can be readily refined by any facility in the U.S. that produces fuels from oil.
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