Update On CBR -- July 25, 2016

The Wall Street Journal has an update on declining CBR. It has a fair number of data points for the archives, and is probably a human interest story, certainly for many on the east coast, but regular readers probably won't find much new in the article.

The changes are evident in North Dakota, once the epicenter of the crude-by-rail trend. Oil output from the state’s Bakken Shale formation has fallen by 180,000 barrels a day from its 2014 peak. Meanwhile, pipeline takeaway capacity has more than doubled since 2010.

EOG Resources Inc., one of the first oil companies to see the potential for trains to relieve pipelines, opened its first rail loading terminal in Stanley, N.D., in 2009. But that terminal hasn’t loaded a train in more than a year, according to Genscape, a data provider that tracks activity at U.S. rail terminals.

“New pipeline infrastructure has been put in place to move significant volumes of oil to market,” an EOG spokeswoman said.

Enough pipeline capacity is coming online to replace all of the current volume BNSF Railway Co. is shipping out of North Dakota, said David Garin, the railroad’s group vice president of industrial products.

BNSF used to transport as many as 12 trains daily filled with crude primarily from North Dakota’s Bakken Shale, carrying about 70% of all rail traffic out of the area. Now it is down to about five a day.

And along with the decline in coal shipping volumes, this is probably not a good-news story for Warren Buffett who owns BNSF. 

But this data point is very interesting:

Even at its height in 2014, crude-by-rail accounted for less than 2% of total rail volumes, according to Association of American Railroads data. But its decline threatens what was once viewed as a sizable driver of growth for the railroad industry, one that many rail companies, along with oil and gas producers, made investments to support.

Between 2010 and 2015, 89 terminals were built or expanded in the U.S. and Canada to load crude on trains, and nearly as many to offload it, according to consulting firm RBN Energy LLC. 

Back to the Bakken:

There could soon be more than enough space to carry away all Bakken oil through pipelines now in the works. Phillips 66 is partnering with pipeline company Energy Transfer Partners LP to develop a pair of pipelines that will bring North Dakota crude to Illinois and then down to Texas.

The endeavor, which will cost close to $5 billion, is expected to take a major bite out of oil train traffic, even though the pipelines will ultimately bring oil to the Midwest and the Gulf of Mexico, rather than to the East and West coasts, where trains have primarily taken it.

Phillips 66 said earlier this year it may still be cheaper to take that oil and put it on a barge for delivery by sea to the coasts than to send it directly there by train.

Something tells me this rail and these loading terminals in North Dakota won't go unused.