BISMARCK – As a North Dakota company prepares to fire up the state’s first production facility for liquefied natural gas, the nation’s largest railroad is pursuing a switch from diesel-powered to LNG-powered locomotives, potentially opening up a major market for the product.
“We’re serious. We are testing them right now,” Matt Rose, executive chairman of BNSF Railway, told Forum News Service in an interview Wednesday at the Williston Basin Petroleum Conference in Bismarck.
Liquefied natural gas is made by cooling natural gas to 260 degrees below zero until it condenses into liquid fuel, primarily methane. The process shrinks the volume of natural gas by 600 times, making it easier to store and transport.
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Rose said BNSF must first prove the technology of using LNG in trains. The railroad currently has two LNG-powered locomotives running around a test track in Pueblo, Colo., he said.
“It’s not a slam dunk, but we continue to be bullish on the ability to do this,” he said.
The U.S. Energy Information Administration predicts that LNG will play an increasing role in powering freight trains in coming years. The seven major U.S. railroads, which consumed 3.6 billion gallons of diesel fuel in 2012, or 7 percent of all diesel fuel consumed in the country, are considering using LNG in locomotives “because of the potential for significant fuel cost savings,” the EIA reported last month in its 2014 outlook.
North Dakota LNG announced plans earlier this month for a liquefaction plant near Tioga that’s expected to produce 10,000 gallons of LNG per day by the end of July and 75,000 to 80,000 gallons daily by the end of the year, company CEO Patrick Hughes told conference attendees Tuesday.
Hughes, who also is CEO of North Dakota LNG’s parent firm, Watford City-based Prairie Companies LLC, spoke mostly about how LNG can displace more than 50 percent of the diesel fuel burned by drilling rigs, resulting in cost savings of 20 percent or greater. Thirty drilling rigs in North Dakota have undergone a dual-fuel conversion to burn both diesel and LNG, he said.
But Hughes said afterward that he also looks forward to working with the railroads on LNG as the opportunity arises.
“I think it’s a matter of when,” he said.
Before LNG locomotives can hit the rails, Rose said BNSF will need to work with regulatory agencies such as the Environmental Protection Agency and Federal Railroad Administration to accommodate the change. The railroad also will need to identify LNG production facilities and a tank car to handle the fuel, and build or overhaul locomotives to burn the LNG once it’s re-gasified, he said.
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“We see this as a big opportunity,” he said. “One, we’re awash in natural gas in this country. And we think that from a cost and an environmental impact standpoint, it’d be a big idea to have the nation’s largest railroad hauling LNG and burning LNG instead of diesel. But it’s like everything in this world – anything that’s really important is really hard, and this is going to be really hard.”
The final piece, Rose said, will be an analysis of the long-term trends of the cost of crude oil versus natural gas to determine if LNG locomotives pencil out.
Rose said it will likely be a several-year process working with regulators and others to move the initiative forward through public policy. He said he has talked to a lot of people about the idea, including North Dakota’s governor and U.S. senators and the White House.
“There’s no one that has said, ‘Gee, that’s a really stupid idea,’ ” he said. “In fact, everybody says just the opposite, what a great idea this is. So there’s this belief that this makes a tremendous amount of sense. But again, implementing it is not without its challenges.”
