BNSF locomotive in Fort Worth, Texas. (Photo by Tom Pennington/Getty Images)
The increase in domestic crude production not only in the Bakken region but in the Eagle Ford in Texas and elsewhere “truly the greatest business development that I think we’ll all see in our collective lifetime,” BNSF Railway Executive Chairman Matthew Rose said Sunday at a panel discussion at the Transportation Research Board’s annual meeting in Washington.
But Rose also put the crude-by-rail story in context: crude shipments account for only four percent of BNSF’s total business. “Most people think it’s 25 percent of our business,” he said. BNSF is also the largest coal hauler and largest ethanol hauler in the country.
He said that “last year was a very difficult service year” due to winter weather, huge volumes, and long delays and complaints from agricultural commodities shippers and other shippers that they couldn’t move their goods to market.
The surge in volume came not only from crude oil, but from sand for fracking, pipe used in drilling, lumber for housing, and from Ford trucks. “We handle almost 25 loads of pickup trucks in Minot N.D. every day,” he said.
Rose acknowledged the uncertainty of the Bakken business given the drop in oil prices since last June.
But he noted that when BNSF first started shipping crude by rail at the start of the boom in 2005, “I used to ask my buddy who is the CEO of EOG [Resources], ‘OK, at what level do you guys stop shipping [and] producing this oil?’ The first number was 80 [$80 a barrel], then he said 70, then he said 60. Over the years, they keep getting better and better at reducing their costs.”
The industry is waiting for the Department of Transportation rule on rail shipment of crude, which should be issued in the first quarter of this year.
BNSF also faces resistance from local officials in some parts of the country to building new tracks and oil loading facilities. Delay in getting permits from local and state agencies is a problem.
Rose said in the long term, population growth will mean more tons of freight being shipped and combined with “our energy issues, our climate issues, our carbon concerns, our lack of highway funding, all these things, it all leads to a common theme of more rail capacity. And that’s why the issue of permit reform is so critical, because if we can’t build the railroad capacity, then we end up with even worse operations. Train staging, trains blocking crossings, things like that.”
“We are sympathetic to the communities,” Rose said. “We operate in all these communities. We’re working with local officials on their concerns. We as a country don’t have a good mitigation plan, a good mitigation funding stream to be able to handle the increase in train traffic.”
As for state legislatures or state regulators putting restrictions on crude by rail, Rose said “if a state doesn’t want a domestic oil supply to reduce their costs of fuel, and if they want to keep bringing it in from Iraq or Nigeria or Venezuela, I’m sure they can spend a lot of energy and find a lot of ways to stop this.”
“But I think we have to keep all this in perspective: what the impact of this is to our country. We just got out of 15 years of war that we all just hated, right? And here we have this opportunity before us to really not ever have to do that again…. The next war doesn’t have to be about oil again.”
Opinions expressed in this blog are those of the author, and do not necessarily represent the positions of the Moving Forward Network or its members. All errors are the responsibility of the author.