Jefferson Energy Terminal
Crude By Rail
In recent years new drilling technologies have emerged that have enabled oil and gas recovery in shale formations and other plays that were once not economically feasible. This has resulted in a rapid expansion of US oil and gas production, which in turn has led to a growing need for crude transportation by rail, especially for transporting crude from areas not currently well served by other transportation modalities. There are many benefits of transporting crude by rail including the following:

An Extensive Network of Railroad Lines

Crude by rail is in part such an important aspect of the evolving petroleum industry because unlike pipelines, railroad lines already connect many of the new drilling sites to the markets that need the feedstock. To get a sense of scope, there are approximately 140,000 miles of railroad tracks in the United States. This compares to about 57,000 miles of pipeline, or nearly three times as many railroad tracks. This allows rail lines to service areas that may not have access to other distribution methods. Finally, thanks to the extensive network of rail lines, crude-by-rail transport is able to rapidly adapt to market conditions, rerouting crude to alternate refineries as necessary or increasing the volume shipped with additional tanker cars.

Lower Upfront Investment

Many transportation modalities require a considerable upfront financial investment before they can be rendered operational. There is also typically a substantial lead time to build out the system and bring it online. Often times there may also be significant regulatory hurdles and delays getting new networks approved. By contrast as previously discussed there is already a vast network of railroad lines and even where lines do not already exist it is relatively quick and inexpensive to build them out compared to many other transportation methods.

Rapid Transport Times

Transporting crude by rail is also a very fast and relatively efficient model of transportation. For example one of the most active shale plays is North Dakota’s Bakken shale. It currently takes about 40 days to transport oil from the Bakken down to the Gulf Coast refineries. By comparison it only takes about 5-7 days to ship the crude by rail. Likewise commercial trucking transportation may be able to compete in terms of time, but not in terms of scale and efficiency. Similarly this example and other landlocked transportation scenarios would not be realistic by cargo tanker ships.

Purity of Product

Another major benefit of crude by rail is that it offers outstanding purity of product. The original composition of the crude shipped from the distribution site is going to remain completely unchanged during transit and reach its destination with the same levels of purity. A good example of this is Canadian bitumen oil sands, which are very dense and heavy. With other transportation methods it is often necessary to first dilute the bitumen before shipping; however, with shipment by rail that is not necessary.

Strong Safety Measures

Rail transport of crude is increasing quickly. The Association of American Railroads states that in 2008 about 9,500 carloads of crude were shipped by rail. Their data shows that by 2013 that figure had risen to 407,642 carloads of crude by rail. Since this climb has been so rapid and precipitous this has naturally led many to wonder about the safety implications of crude by rail. Fortunately data indicates that crude by rail is safe. According to the Association of American Railroads over 99% of hazardous material shipments, including crude, reaches its destination without spills.

Additionally the industry is exploring ways to make crude-by-rail transportation even safer. There are proposed plans that would decrease the speed of freight trains carrying crude through urban areas such as Houston, San Antonio, and the Dallas-Fort Worth area from 50 mph down to 40 mph. Furthermore the Department of Transportation is considering new safety standards that would result in the upgrade or full replacement of thousands of railcars.

North American Energy Independence

A final major benefit of transporting crude by rail is that it falls squarely in line with the goal of North American energy independence. Transporting crude by rail allows refineries and plants to acquire the resource from other domestic states or from Canada rather than importing it from overseas. According to data from the Congressional Research Service in 2011 the US imported just 1.6 million barrels of crude by rail from Canada. By 2013 that figure had risen more than twentyfold to 40 million barrels of crude by rail. This helps significantly relieve our reliance of crude important from more conflict-prone areas of the world like the Middle East or South America.

The transportation of crude by rail will likely never supplant other transportation modalities such as pipeline, tanker ship, and commercial truck; however, thanks to the benefits crude by rail offers in terms of an extensive network of railroad lines, the ability to rapidly expand, quick transport times, solid safety performance, and the hope for North American energy independence crude by rail is an integral piece of the petroleum transport picture.