Train delayed again? Blame the oil boom.
With oil production booming in the US, producers are increasingly turning to railways to get crude to refineries. And so much oil is hitting the rails that it's crowding out grain and coal – and even people.
US oil production is the highest in decades, and more and more crude is traveling by train. That is slowing shipments of grains, gravel, and even coal, as commodities and a resurgent oil industry compete for a finite amount of US rail. More oil pipelines could help ease the freight bottleneck, but those take time to build and have become controversial topics in the debate over the future of US energy.
In the meantime, firms are taking to the rails to get the country’s newfound oil wealth to market.
“Oil just tends to be more valuable than other products,” says Adie Tomer, a senior research associate in the Metropolitan Policy Program at the Brookings Institution, a Washington-based think tank. “As more and more oil comes online, the freight companies want to ship more.”
Today, rail carries more than 11 percent of US oil. That’s a huge jump from five years ago, when trains transported less than 1 percent of domestic oil, according to a March report by the Center for Strategic and International Studies (CSIS), a Washington-based think tank.
The glut of oil trains is even pushing other fossil fuels out of the market, with sparse coal shipments creating headaches for utilities in Wisconsin and Minnesota. In North Dakota, trains full of Bakken oil push aside grains and other crops. And the stakes are high: North Dakota growers could lose $160 million if they are unable to ship grains via rail and must instead sell locally at a reduced price, according to a North Dakota State University study.
“This rail backlog is a national problem,” Sen. Heidi Heitkamp (D) of North Dakota told the New York Times. “The inability of farmers to get these grains to market is not only a problem for agriculture, but for companies that produce cereals, breads and other goods.”
So how to alleviate the rail bottleneck? Pipelines are the obvious answer, but concerns over climate change and carbon emissions have made long-term investments like the Keystone XL pipeline controversial flash-points. Environmentalists and green groups contend that pipelines will become stranded assets in a post-carbon economy, and will encourage risky oil development in the meantime.
For his part, President Obama has said he will only approve the Keystone XL pipeline – which would help alleviate the Bakken bottleneck – if it does not “significantly exacerbate the problem of carbon pollution.” That pledge ties pipeline construction to strategic decisions on climate issues, and not to market forces.
Demand for oil in the global marketplace isn’t slackening, though, even if there is political will to veer away from carbon-intensive fossil fuels. With pipelines a far-off and uncertain solution, rail is a convenient stop-gap.
Rail is especially necessary for oil shipments in regions lacking in pipeline capacity, like North Dakota. There, 60 percent of the oil leaves via rail, en route to refineries in other states.
“That’s why Keystone XL is such a big deal – there’s no pipeline in that region. Rail is the only way to get that oil out,” Mr. Tomer says in a telephone interview Tuesday.
High-profile catastrophes like the deadly Lac-Megantic rail explosion in Quebec last year have raised concerns about the safety of rail. In July, the Department of Transportation proposed new safety rules in an effort to improve the safety of transporting crude oil by rail. But as CSIS’s report on rail safety demonstrated, rail is accident-free more than 99 percent of the time.
With increased traffic comes increased risk, though – especially with train cars hauling flammable crude. “As you use more of the capacity in the system, you're more prone to accidents – and with oil on rail, those can become disasters,” Tomer says.
In contrast, pipelines tend to reroute around areas of heavy population, according to Tomer, and are dramatically safer and more efficient.
The drawback? Pipelines aren’t built in a day. Whereas rail has some ability to expand and contract to meet the demand of oil shipments, pipelines lack that flexibility.