Watching Government: Tackling transportation issues

May 30, 2016
Simply because a problem has become somewhat less urgent doesn’t mean it’s no longer a problem. Volumes and shipments of crude oil and products by rail in the US may have fallen from their peaks in the last year or so, but it still matters how well states and communities can respond when there are accidents, spills, and fires involving any kind of energy transportation system.

Simply because a problem has become somewhat less urgent doesn’t mean it’s no longer a problem. Volumes and shipments of crude oil and products by rail in the US may have fallen from their peaks in the last year or so, but it still matters how well states and communities can respond when there are accidents, spills, and fires involving any kind of energy transportation system.

“There was a bubble in crude oil prices. We also built one in infrastructure. There are way too many transportation assets to handle the needs,” Rusty Braziel, president of RBN Energy, told a committee examining US transportation of petroleum, natural gas, and ethanol at the National Academies of Science, Engineering & Medicine on May 12.

What caused the glut? “There are 1,281 onshore crude rigs that are parked out there doing nothing. Only 381 are still working. Crude production fell during 2015, but gas production didn’t. The industry is much more efficient, able to drill a deep well in an average 7.7 days now compared to 22.3 days in 2011. A given rig could bring on 9,000 b/d of production then. Now, it can bring on 27,000 b/d,” Braziel said.

The Bakken field’s production surge created demand for rail transportation to refineries when pipelines weren’t available 5 years ago. “Railroads in the Upper Midwest were geared to handle agricultural shipments, not larger crude unit trains carrying more than 66,000 bbl in 100 tank cars,” Braziel said. Forty-three unit train and 56 manifest train-loading terminals were built, he told the experts assembled by the academies’ Transportation Research Board.

Rail cars on sidings

Pipeline operators responded. When several reversed their flows in 2014, price differences between rail and pipe began to disappear. “More crude is moving out of North Dakota by pipeline than by rail now, and more pipelines are being built,” Braziel said. “Many rail cars are parked on sidings now because it makes more sense to use pipelines.”

Many North Dakota producers made take-or-pay agreements to use rail terminals for up to 4 years, Braziel said. “Since 2014, 65 upstream companies have declared bankruptcy. That means those take-or-pay deals will be thrown out, which is hitting midstream companies,” he said. That could make midstream transportation assets so financially appealing that some refiners might start to buy trucking fleets, he added.

But the shifting US oil and gas transportation landscape hasn’t dimmed interest in solving problems caused by accidents. One panel examined crude oil shipments’ properties and environmental impacts of releases. Another brought reports from the American Association of Railroads and Independent Liquid Terminals Association on accident prevention programs that have intensified.

The work goes on.