Report highlights BNSF’s interest in natural gas

Natural gas, it’s just not for trucks to experiment with anymore. In fact, a Class I railroad is, too, according to a Wall Street Journal report published this week.

The Journal report stated that BNSF Railway Co., one of the nation’s largest consumers of diesel fuel, is planning on testing natural gas to power its locomotives this year. And it explained that United States natural gas production will accelerate over the next three decades in conjunction with “weakening oil’s dominance as a transportation fuel and provide a new outlet for the glut of cheap natural gas in North America.

What’s more, BNSF CEO Matt Rose said in the WSJ that shifting to natural gas “could be a transformational event for our railroad, adding that it would “rank right up there” with the industry’s historic transition away from steam engines last century.

From a practical perspective, it really is difficult to try to overlook the spread between diesel gasoline prices and natural gas prices. Diesel is currently sitting at $4.13 per gallon on average, according to the Department of Energy’s Energy Information Administration and the Journal article says that the equivalent amount of energy in natural gas is 48 cents at industrial prices. According to EIA data, railroads currently use 3.1 billion gallons of diesel annually.

But even with the significant price difference, there is no overlooking the upfront needed and required costs for a large player like BNSF to make the switch to natural gas.

There are several things which require a significant capital investment outlined in the WSJ report, including:
-getting approval from federal regulators on fuel-tank safety;
-the need for different fuel depots, special tanker cars to carry the fuel, and training for depot workers;
-retrofitting a diesel locomotive and adding the tanker car could add 50 percent to the roughly $2 million price tag, with the caveat that the increase would diminish as the economies of scale kick in; and
-an investment into cooling natural gas into a dense energy-packed liquid

In the case of BNSF, Rose said that would shift to a retrofit of existing road locomotives if the pilot locomotives, which figure to get rolling in the fall with retrofitting a year after, are efficient.

A chief benefit of a railroad transition to natural gas cited in the report is that trains are easier to fuel than other modes of transportation due to the reason that they repeatedly travel on fixed routes, which, in turn, make it easier to build enough fueling depots.

And this is a major difference between the potential for natural gas on the rails and the current undertaking by various trucking companies in that truck routes can vary more and the ability to find fueling stations is not easy, the report said.

It is clear that all modes of freight transportation have a long way to go before natural gas-powered assets are commonplace, but BNSF really is (pardon the pun) on the right track.

As this movement gains traction in the future, which is likely given the current state of fuel prices, Newsroom Notes will endeavor to keep you updated and informed on the next steps.