Note: Op-ed. How I see things. If this is important to you, go to the source.
I'm not sure if BRK-B hit new all-time 52-week highs three consecutive days last week or not.
If I'm reading the Yahoo!Finance site correctly, BRK-B hit new all-time 52-week highs last week, Wednesday, Thursday, and Friday. BRK-B closed at 52-week all-time highs on Wednesday and Thursday, but on Friday, after hitting a 52-week all-time high for the third consecutive day dropped back at the end of the day to close at $342.41, down from the intra-day high of $346.87.
BRK-B is a value stock; it's not supposed to be moving this high this quickly.
So, what's going on.
Most folks are focused on:
Charlie Munger: killing it! And,
Warren Buffett: killing it!
Prior to the weekend, the big stories that were moving BRK-B:
China, reversing course, said it would support the market and re-opened Shenzeng, which made Charlie Munger's bet on Alibaba look brilliant.
Meanwhile, excitement in the oil patch, especially OXY, made Buffett look like a genius.
But there's a third story It broke over the weekend.
Although the stories are conflicting, it sounds like Canadian Pacific has locked out the union. If not, the union sounds like it's not having its workers report to work on Monday.
West of the Mississippi, or thereabouts, there are three -- and only three major railroads:
BNSF: wholly owned by Warren Buffett's Berkshire Hathaway
UNP; and,
CP with its partnership with KSU (more on that later).
It's worth repeating: Rail transport comprised only 9% of Berkshire's total revenue, but it generated over 25% of total EBT.
BNSF
Railway
Berkshire's freight rail transportation business operates one of the
largest systems in North America. BNSF Railway ships coal as well as
consumer, industrial, and agricultural products.
BNSF Railway's revenue fell 11.3% in 2020 to $20.9 billion as EBT fell 6.3% to $6.8 billion. Rail transport comprised only 9% of Berkshire's total revenue, but it generated over 25% of total EBT.
When the media reports BRK's stock portfolio, they generally do not include the companies Warren owns outright. Look at BNSF:
On another note, AAPL, comprising 43% of BRK's entire equity portfolio is trading at recent lows. Once AAPL gets back on track, BRK is going to look even better.
So, bottom line, hitting on all cylinders, BRK:
the China story, thumbs up;
oil and OXY, thumbs up;
Apple and AAPL, thumbs up; and,
now, CN could face work stoppages, benefiting UNP and BNSF.
I'm looking for UNP and BRK-B having another good week.
******************************* The CP-KSU Merger
Now, back to the CP-KSU merger.
It's gonna happen but it's not over yet.
Shareholders voted to approve the merger and to the best of my knowledge, the KSU shareholders already got their $90 / KSU share and their CP shares.
One of the first equity investments I ever made -- decades ago -- was buying shares of Burlington Northern (BNI). I vaguely remember buying shares in five different publicly traded companies; BNI was one of them.
I had a lot of fun following BNI over the years. I have a clipping somewhere of a front page story in The Wall Street Journal -- this was before it was available on-line -- about the race between BNI and Union Pacific to have the first dual track rail from Chicago to Los Angeles. Wow, that must have been back in the late 1980's, maybe 1990's; I forget. But it was quite a race to see which railroad would be first.
Then two years ago I ran into a BNSF honcho while attending a swimming meet. I mentioned that story, and congratulated him on his company being the first, winning the race, beating Union Pacific. He said BNSF wasn't quite there. I was somewhat dumbfounded. Two decades and they still weren't there. I wasn't sure if he was accurate in his response.
After this year, BNSF Railway Co. will be more than 99 percent finished with a second, parallel line to its 2,200-mile (3,500-kilometer) Los Angeles-to-Chicago route. Doubling up will create a rail superhighway speeding deliveries of toys, electronics, autos and other goods, because trains won't have to yield to each other on sidings as they do on single tracks.
Snatching consumer products and other freight from big rigs is more crucial than ever. Coal, once a pillar of U.S. rail traffic, is fading as utilities burn cheaper and cleaner natural gas. Average weekly carloads are down 20 percent from five years earlier, according to data compiled by Bloomberg.
The Los Angeles-to-Chicago route links the busiest U.S. container port to the biggest mid-continent rail hub, giving BNSF a leg up in the race to find alternatives to those dwindling coal cars. And there's room to grow: consultant FTR Transportation Intelligence estimates that trains now move only about 19 percent of the 71 million trailer loads that travel 550 miles or more, a rough threshold for where rail becomes an viable option.
“We have significant opportunities to convert” truck cargo to rail, said Katie Farmer, chief of BNSF's consumer group. “We've really narrowed the gap now between what was traditionally rail service and over-the-road trucking.”
That's where the dual tracks come in. More and longer trains can be run on two tracks than on a single line. Once the double-tracked section in Oklahoma is completed at the end of October, BNSF will have just seven more miles of line to build — involving three costly bridges — and will be able to run 78 trains a day in that region, up from 62 now.
With no need to pull over, they can also go faster. A BNSF train laden with truck trailers now can make the Los Angeles- Chicago run in 64 hours, said consultant Jindel. Completing the twin-tracking will shave off as much as three hours, he said.
XPO Logistics Inc., an arranger of shipments
for customers such as Costco Wholesale Corp., figures that about a third
of the long-haul freight that it now sends by truck is a candidate to
switch to train, Chief Strategy Officer Scott Malat said. If that rule
of thumb were applied across the industry, there could be more than $100
billion of business up for grabs by railroads, he said.
Much more at the link.
Now that BNSF has been bought by Warren Buffett it's harder to get updates on BNSF. A big thanks to the reader for sending me this link.
This is not an investment site. Do not make any investment or financial decisions based on what you read here or think you may have read here. I don't know where the blog is going this morning, but I am pretty sure that if I mention ten companies, I invest in, maybe, one of them. I talk about them because I find the story lines interesting; I don't talk about them for investing purposes.
**************************
Coffee Shops
I read a story yesterday that some analysts expect Starbucks shares to do better and better. They talk about the competition that Starbucks has: Dunkin' Donuts, Peet's, McDonald's, independent mom and pop coffee shops, marijuana shops in Colorado.
From an investor's point of view some may do better, some worse, who knows? But the article never discussed the "culture" as it were. Dunkin' Donuts does not compete with Starbucks. Put them next door to each other and they would both do well, but with their "own" customers.
Same with McDonald's.
In Belmont (Massachusetts), I often went to Dunkin' Donuts because it was just a block away; in the rain, I wasn't going to ride my bike one mile for Starbucks. I never truly enjoyed my experience at Dunkin' Donuts but their regulars did, and their regulars would never step foot in Starbucks, with some exceptions, I suppose. I don't know enough about Peet's yet to say how Starbucks and Peets will compete. A new (and first in the area) Peets is going in next door to where we live (replacing the Starbucks). It's in the grocery story (like Starbucks is in Target) but it is not inviting at all. My hunch is that in this particular case, Peets will mostly be carry-out. As it is in Target's Starbucks.
Against a stand-alone Starbucks, I have not yet seen a real competitor in that niche.
*********************************** Coal
I think coal is really, really dead in this country. There are three stories out there right now. First, there was the story making the rounds (again) yesterday about the largest coal mine operator warning us that there will be many coal mining bankruptcies in the next twelve months; he, himself, said he is snapping up the good ones at a bargain price; he did not say what his plans for the future are. The second story was about the governor of Wyoming (a Republican) approaching the governors of Washington State and Oregon (both Democrats) hoping to get their states to agree to larger terminals to ship Wyoming coal to China. If Washington and Oregon agree, I would be surprised. I think the state of Wyoming could be in a heap of trouble.
Finally, a third story, the link sent to me by a reader this morning, from The Wall Street Journal. My rule of thumb, take it for what it's worth, if a utility wants to go out and buy a coal company to produce electricity, it would expect to pay $750,000/MW (or less) in the old days (five years ago). It's probably up to a million dollars/MW now. For a natural gas power plant, a similar amount, maybe closer to $1 million/MW now, but it was cheaper some years ago. For a new wind farm / solar farm figure about $3 million/MW; for a used wind farm, significantly less. Maybe even get one for free with all the tax credits, subsidies whatever. No matter how far off my figures out, the cost for producing electricity is about $500,000 to $3 million per MW in this country. And $3 million/MW is outrageously expensive. If that's what your utility is spending on new sources, you're getting ripped off, but probably feeling good about "going green."
So, now we get this story out of Mississippi. Regular readers are very familiar with it though we haven't talked about it in ages. It's that "clean coal" plant in Mississippi. This is the link to the story. You may need a password. If so, and you don't have a WSJ subscription, try googling may have to raise electricity rates for Mississippi power customers by 41%, or $37 a month for the typical household. This story is now tracked here.
The cost for electricity for this plant has soared to .... drum roll.... $10 million / MW. Let's do the math. They say the plant will now cost over $6 billion to provide less than 600 MW of electricity. Nice numbers. 6 billion / 600 MW. So it's going to be a "one" followed by a zero. I doubt it's three zeroes ($1,000/MW); I doubt it's four zeroes ($10,000/MW) or even five zeroes ($100,000/MW), so now we're getting up to $1 million/MW (six zeroes) but $1 million/MW would not get a headline story. So, we're talking $10 million/MW for this power plant.
The cost of the Kemper power plant has ballooned several times to $6.2
billion, as the price tag swept past the $2.88 billion cap set by state
utility regulators to protect customers from budget overruns.
So, $6.2 billion is the estimated cost.
The lede said this:
South Mississippi Electric Power Association, which furnishes power to
smaller utilities in the state, dropped its plan to buy a $600 million,
15% stake in the project spearheaded by Atlanta-based Southern Co., citing construction delays.
Fifteen percent of what is $600 million? $4 billion. Somewhere between the second paragraph of the story and the eleventh paragraph of the story, the cost of the plant ballooned from $4 billion to $6.2 billion.
And the tenth paragraph was very, very short. One sentence. And they all raised their hands and said, "Amen."
I hate to see the estimated cost of this plant on Monday.
*************************** Workin' On The Railroad
Which of course leads us to the next story. If the Wyoming story and the Mississippi story tea leaves tell us coal is dead, who's next to feel the pain. Yup, you guessed it. And the stories are already out there. A lot of analysts "grade" their recommendations on an "A, B, C, D, F" scale. At the height of the CrBR and CoBr (crude-by-raid and coal-by-rail respectively), I assume UNP was given an "A" rating by Merrill Lynch. I don't know. I do know that Merrill Lynch now rates UNP a "D." I assume Merrill Lynch has an "F' in their ratings but that I do not know either. But I do know that yesterday, Merrill Lynch was giving UNP a "D" recommendation.
There's a story out there on UNP that it will be crushed with decline in coal shipments. Guaranteed: UNP won't make up the difference shipping Teslas.
And now today, Don sends me this story, that Warren Buffett is laying off railroad employees in North Dakota. It's a bad news story coming out of North Dakota, so you know it's being posted by The Dickinson Press:
BNSF
Railway Co., the largest railroad in North Dakota, is furloughing some
employees across its network, including in Grand Forks and elsewhere in
the region.
Jim
Chase, the North Dakota legislative director for the Sheet Metal, Air,
Rail and Transportation union (SMART) said almost 200 operating
employees have been furloughed in four locations: 11 in Grand Forks, 40
in Dilworth, Minn., 60 in Mandan, and 71 in Minot. Operating employees
responsible for running the trains, like engineers and conductors.
“I’ve never seen cuts this deep,” Chase said. [Hasn't been to a coal mine lately.]
Chase
added many of those employees have been hired within the last year. BNSF
hired about 7,000 new employees to meet increased shipment demands.
There are several story lines in that article but I don't have time to go into them right now.
*****************************
Transition
Well, actually I do have time. I'm retired, but the line at Starbucks has now dwindled from 40 to one, and it's my opportunity after being here since 9:55 a.m. to now 10:39 to get a tall coffee with no room for cream. I used to order by "type" -- Pike, Tall Blonde, Ethiopian Dark, Somalian-Hair-On-Fire, or whatever was on tap, but they didn't always have what was showing, so I now just order whatever is brewed. I used to order a Tall Blonde but was always disappointed; not what I thought she would be. If one can tell the difference, one is doing better than I. And yes, that's the correct grammar. "I" (not "me") follows "than."
So, there you have it. I didn't need the coffee; we're going out to lunch in an hour. I don't want to go out to lunch because I'm perfectly happy here but I would be seen as anti-social, so I will go to lunch. It will turn out to be incredible: it's a new Asian restaurant for me. Our older granddaughter recommended it (she's eleven years old) and wants to take her best friend, or as they used to say, BFF. I don't know what they say call a BFF now.
So, for investors -- OMG -- did I say "investors"? This is not an investment site, but I can't resist. It looks like coal is dead but could be a great opportunity to build a portfolio for a great-granddaughter with a significant holding of shares in coal companies. Rail could be in trouble but they have the ability to scale up and down fairly quickly, but it could be rocky. Big HealthCare is going to do very, very well. REITS and MLPs and so-called utility "yield cos" will do very, very well.
**********************
Update On The JV Team
More interesting to go on to next subject. The mainstream media is not yet reporting it. Fox News is reporting it. Yup, ISIS has attacked INSIDE Saudi Arabia. It's the lead story over at Fox News right now. Most of the other networks talk about weather on the weekend. So does Fox News unless ISIS attacks INSIDE Saudi Arabia. Then weather slips to the second hour. Add this bullet to previous ISIS bullets:
ISIS attacks INSIDE Saudi Arabia
I assume the president has gone golfing. Which reminds me: didn't the US president just hold a Mideast Conference in Camp David to reassure our Mideast allies they have nothing to fear but fear itself? ISIS was a JV team.
Saudi Arabia princes left the conference muttering, "If ISIS is the JV team, let's hope the varsity team doesn't show up."
Again, remember this is not an investment site. Do not make any investment or financial decisions regarding ISIS. The pharmaceutical company. In 2003, one could have picked up ISIS shares for $4.00/share; ISIS is now trading near $70/share. And so it goes. I have never invested in ISIS. Never have, never will.
But I digress, the ISIS on the other side of the world now stretches solidly from Tunisia in west North Africa through Libya and then over to Syria (where it controls half the country -- the fun part of the country), to Iraq, to Yemen (unlike Syria, not a fun country), and now to Saudi Arabia. I read this morning that the US Congress is looking into President Obama's ISIS strategy. But then the Senate passed the president's trade bill without reading it because they saw how well ObamaCare worked out and they didn't read that either. [Later, May 25, 2015: Congressional Dems and GOP agree that the president's war on ISIS is in "neutral," at best.]
Okay, that's it. That's all the subjects I thought about writing about while riding my bike to Starbucks this morning: coal, rail, Dunkin' Donuts, Syria, ISIS, the unread trade bill passed by the US Senate, the thoughtful, deliberative body of the Congress.
There will be factual and typographical errors in a long post like this. They will be corrected when I am alerted to them. This post is for my use only. Use it any way you want but don't quote me on it. I will deny it all.
The grain, long overshadowed by more-plentiful crops, suddenly is in
high demand thanks to China’s soaring appetite for animal feed and a
shift in its buying preferences away from foreign corn. A 15-fold
increase in imports of U.S. sorghum by China over the past year has
pushed its price above corn’s in parts of the U.S., a rarity that
highlights how policy shifts by Beijing can have a far-reaching impact
on the global grain trade.
China’s buying pace has surprised many traders and grain merchants
who deal in sorghum, a drought-hardy crop that also is known as milo in
the Great Plains, its traditional growing region. Some Kansas grain
elevators are offering farmers about 10% more for sorghum than for corn,
inverting the roughly 10% premium corn usually fetches. There is no
futures market for sorghum, so traders use corn futures to benchmark
prices and manage risk.
“It’s unlike anything I’ve seen in my career, and I’ve been doing this for about 30 years,” said
Charlie Sauerwein,
grain-merchandising manager with
WindRiver Grain LLC, a Kansas company that ships grain by rail to U.S. ports.
Numerous factors, including water shortages, high feed prices and
starch availability/requirements, are luring some dairy producers into
planting alternative crops. “Sorghum silage, for example, is gaining
attention as an appealing substitute for corn silage as people search
for drought-friendly crop solutions."
Sorghum requires considerably less water than corn. This hardy,
drought-tolerant plant can thrive even when rainfall and/or irrigation
is limited, making it a logical choice for areas facing water supply
issues. Sorghum seeds are much less expensive than corn seeds,
therefore, the input costs for growing sorghum are lower than corn.
Sorghum may also yield nearly the same tonnage per acre as corn.
When it comes to overall forage quality however, there are
differences and anyone planting sorghum silage needs to be aware, so the
differences can be managed accordingly. Similar in protein but lower in
energy, sorghum silage offers significantly less starch. This means it
cannot serve as a full replacement to corn silage without additional
ingredients or forages being added to the diet. The starch content of
sorghum silage runs between 11 and 16 percent, whereas corn silage,
known for its high energy and digestibility, provides starch levels
between 25 and 35 percent.
CSX ($0.49): CSX reported fourth quarter earnings per share of $0.49, up 17% from $0.42 in the same
period last year. This represents a new fourth quarter record for the
Company. Revenue grew 5% in the quarter, to $3.2 billion, also a fourth
quarter record, with broad based growth across nearly all of our
markets, reflecting continued economic momentum.
Shale-oil tankers may be leaving the train, but that won’t dent a
bull case for railroads as the best way to play industrials stocks amid
plunging crude prices.
That’s what analysts at Credit Suisse
wrote in a note Thursday, in which they also argued that for all the
buzz around shipping crude by rail, railroads can still rely on other
lines of business, such as transporting general merchandise. Moreover,
capacity is tight, with or without oil.
The analysts had three top picks: Canadian Pacific Railway Ltd,
CSX Corp.,
and Union Pacific Corp.
On average, there’s 20% upside
for their stock prices in the next 12 months, they said.
Railroads
have been a critical link for the boom in U.S. and Canadian oil
production, getting to and from shale fields that are far beyond the
reach of existing pipelines, and helping ease pipeline constraints in
other areas. Railroads also transport sand used in hydraulic fracturing
and carry natural-gas liquids.
In North Dakota, a top-producing
oil state, rail accounts for more than half of crude transportation.
Earlier this week, state officials said North Dakota’s oil production
rose to 1.19 million barrels a day in November, a record, even as energy
companies drilled fewer wells and operated fewer rigs in the state due
to the lower oil prices.
In BNSF’s North Region, the company will invest approximately $1.5
billion across eight states for engineering maintenance and line
expansion projects, of which approximately $700 million* is
planned for projects to expand the rail lines and Positive Train Control
(PTC) in that region.
BNSF’s North Region has experienced the most
rapid growth in recent years. It is the corridor used to move
agriculture and coal to export facilities in the Pacific Northwest,
petroleum products produced in the region that are destined for
refinery facilities, and for consumer products shipped to and from
marine ports in the Pacific Northwest.
The North Region is also a
destination point for materials that support the production of crude
oil in the Bakken shale formation.
The North Region includes: Illinois, Minnesota, Montana, North Dakota, Oregon, South Dakota, Washington and Wisconsin.
Expansion projects include:
Continue to install double track on the Glasgow subdivision between
Minot, ND, and Snowden, MT, located in the far western part of the
state.
Extend the siding on the Dickinson subdivision located between Mandan,
ND, and Glendive, MT, and expand the terminal at the Dickinson yard to
accommodate expected growth in single car volumes.
Convert the entire Devils Lake subdivision, located between Minot, ND,
and Grand Forks, ND, to centralized train control, which will improve
capacity for freight operation while improving on-time performance of
passenger trains.
Complete implementation of centralized train control on the Hillsboro
subdivision, located in eastern North Dakota. Upgrade connection track
between the Hillsboro subdivision and the Devils Lake subdivision to
permit faster train speeds.
* Illinois is included in the
disclosure of the planned expenditure for the North Region despite the
state being part of the company’s South Region. In this announcement
Illinois was included in the North Region because the Chicago complex
also serves as an origination and destination point for traffic along
that corridor. Illinois was also included in the North Region reporting
when BNSF’s 2014 capital expenditure was announced in the prior year.
***********************************
A Note For The Granddaughters
It's been a good night. I finally finished James Essinger's Ada's Algorithm: How Lord Byron's Daughter Ada Lovelace Launched The Digital Age, c. 2014. Ada Lovelace is receiving some new attention this year in light of the Alan Turing movie, The Imitation Game. She is also heavily featured in the new book by Walter Isaacson (Steve Jobs [2011],
The Innovators: How a Group of Inventors, Hackers, Geniuses, and Geeks Created the Digital Revolution (2014). I have the new Isaacson book around here somewhere -- I think the cover has the portraits/photos of Ada Lovelace, Alan Turing, and Steve Jobs. The Essinger book is "the story of the woman who wrote the first computer program -- in 1843."
The book is "endorsed" by Reshma Saujani, found of Girls Who Code and author of Women Who Don't Wait In Line. From the Girls Who Code website: In middle school, 74% of girls express interest in Science, Technology,
Engineering and Math (STEM), but when choosing a college major, just
0.3% of high school girls select computer science.
Our older granddaughter, in middle school, is one of the 74%. It will be interesting where she ends up.
The Essinger book is a quick read, but extremely well-researched it appears. One could probably read it over the course of several evenings, but I enjoy taking my time to finish a book. On completion, I felt a very intimate relationship with someone who had lived more than a 150 years ago. Really well done. It's the kind of book that Anglophiles will really enjoy; there's a little bit of British trivia on every page it seems. It's also fun to use Google maps and satellite views to check in on many of the sites mentioned in the book.
Before calling it an evening, my wife and I watched a new DVD I bought while we were out in southern California over the Christmas - New Year holidays. Due to family commitments we were able to visit only one museum this California trip, the Norton Simon museum which we had not seen in years. While there, among several books also bought, I bought the museum DVD, "The Art of Norton Simon." Surprisingly, it was narrated by Gregory Peck.
Slump in oil prices probably doesn't necessarily mean grain farmers will have better access to wheat-carrying unit trains. The Bakken.com is reporting.
The U.S. exported a record amount of crude
oil in November after a five-year run of production growth that
has made the country the most oil-independent in 20 years.
Shipments surged 34 percent to average 502,000 barrels a
day in November, the most on record dating back to 1920, data
from the U.S. Census Bureau and the Energy Information
Administration show. The previous peak was 455,000 in March
1957. The U.S. is now the 17th-largest exporter.
I have to really chuckle. When I first started blogging in 2007/2009 (and deleted the original blog in a moment of insanity) I suggested US oil exports would surge. I did not know there was a ban. A reader wrote to tell me. I checked the law and wrote that the exceptions were large enough to drive a 100-unit oil train through. More of the story:
About 218,000 barrels a day left from northern places like
Detroit, upstate New York and Maine. Another 174,000 exited via
Texas ports like Houston and Corpus Christi. About 70,000 went
through Montana and North Dakota, and 38,000 out of New Orleans.
The U.S. bans most exports of unrefined crude oil.
Shipments to Canadian refiners are allowed, as are re-exports of
foreign oil, and a few other small exceptions. Congress will
discuss repealing the ban in 2015, Representative Ed Whitfield,
a Kentucky Republican and chairman of the House Energy and Power
Subcommittee, said at a Dec. 11 hearing in Washington.
For now, the existing exceptions are helping producers find
higher-value markets for U.S. crude. The U.S. benchmark West
Texas Intermediate was $2.50 a barrel less than than
international Brent yesterday, from a $13.44 discount a year
ago.
This is a very interesting story. I talked to a CEO of an oil company located in Texas and he said something I never gave any thought to: all oil produced is sold.
Unlike Christmas wrapping that goes on sale after the holidays, and then a lot of it never sold and just thrown away, produced oil is not dumped in the ocean. It ends up going somewhere. The Bloomberg suggests exactly that. Very, very interesting. There's more than just Cushing, Pennsylvania refineries, etc., for Bakken oil. Very, very interesting.
A pipeline operator that runs several lines across the U.S. and
Canada, restarted its North Dakota system after a fire at a
truck-loading facility, according to a company spokesman, the Globe and Mail reports.
The fire started yesterday at the facility that was leased to its
unit, Tidal Energy Marketing, a spokesman for Calgary-based Enbridge,
told the publication. Eight out of 12 crude storage tanks, with a
capacity of 400 barrels each, caught fire at the site, according to a
manager at the Emergency Management Services for McKenzie County, ND.
North Dakota is home to the Bakken shale formation that
contributes more than 1 million barrels a day to U.S. oil production.
North Dakota Pipeline Co., an Enbridge unit, operates a 826-mile system from Plentywood, MT to Clearbrook, MN.
More than 1,600 barrels of crude were ablaze just south of Williston,
N.D., on Thursday after storage tanks caught fire while trucks were
delivering oil, but no one was injured and officials said they intend to
let the blaze die out.
Maybe it's cheaper to burn Bakken crude oil than pay for its shipping. LOL.
Curiouser and curiouser (small tanks, not on NDIC maps; no one knows who owns them -- well, obviously someone does):
It was not immediately clear who owns the storage tanks that caught
fire. The tank battery does
not appear on state regulators' maps.
The crude damaged by the
blaze is a minute proportion of the more than 1 million barrels produced
each day in North Dakota, the second-largest oil-producing state in the
United States.
The blaze started when two trucks were delivering crude to the
12-tank battery on Thursday afternoon, officials said. Nearby residents
reported hearing and feeling an explosion.
Each tank has a capacity of 210 barrels. All 12 of the tanks contained crude, Perez said, and eight of them caught fire.
Trucks
must be grounded each time they deliver crude, and it was not clear if
both of the trucks were properly grounded on Thursday to divert
electrical discharge.
Disclaimer: I know nothing more about this fire than what is being reported above.
***********************************
GE? No, Gee Whiz It Could Be a Tough Year
Disclaimer: this is not an investment site. The following helps me understand the Bakken and has nothing to do with investing. Zacks is reporting:
Zacks Investment Research now holds a pessimistic view on industrial titan General Electric Company,
as evident from its recent downgrade to Zacks Rank #4 (Sell) from Zacks
Rank #3 (Hold). The gloomy outlook comes on the heels of the
disappointing guidance given by the conglomerate as it expects a
downslide in oil prices to hurt its performance in 2015.
Yet another company has joined the litany of energy names that are slashing drilling budgets in response to the oil price skid.
Linn Energy said it cut its oil and natural-gas budget by
53% to $730 million for the new year with plans to focus on lower-risk
projects and expansions in California, among other areas. Linn and its
sister company LinnCo LLC also slashed their annual dividends to $1.25 a share from $2.90.
For a master-limited partnership to cut its dividend is a disaster.
The high yields are what lure investors to the stocks. Yet Linn’s share
price has rallied today, recovering from a sharp pre-market decline to
rise almost 12% in recent trading to $11.37 a share with more than 5
million shares changing hands.
Earlier this week, American Eagle Energy
said it suspended its drilling operations and likely won’t resume them
until oil prices improve, yet another energy company has fallen victim
to falling oil prices.
Last month, Chevron suspended plans to drill for oil in Arctic waters. ConocoPhillips and BP are among many companies to announce pared capital-spending plans, while EOG Resources has said it would shed many of its Canadian oil and gas fields to refocus on the U.S.
Linn’s share price has dropped more than 65% over the past four months.
I've been looking for snippets suggesting where companies might go in lieu of the Bakken. This story provides one very small snipped. You know it's going to be a tough year when California is considered "low-risk."
Last year grain elevators, ethanol producers and others were
frustrated by a shortage of rail cars and long delays in shipping their
products. And analysts predicted the backups would stretch out for
years.
But now, with a decline in oil prices, an anemic export market for
grain, a snowless December and beefed up staff at railroads, rail
service is back on track.
“I think the way it’s going, the railways may be out looking for
business pretty soon,” said Jeff Spence, grain division manager, for
Crystal Valley Co-op in Lake Crystal (Minnesota).
There are 124,000 rail cars on back order as
of September 30, [2014] according to the latest figures available from the Railway
Supply Institute in Washington. That's up 25 percent from June 30, and
an all-time high.
The larger manufacturers such as Trinity
Industries Inc., FreightCar America Inc., and Greenbrier Co. Inc., have
backlogs that represent as much as two years of deliveries at the
current rate.
....strong demand for car types apart from tank cars and frack sand,
especially for automotive, plastic and grain cars. Coal cars are one of
the only car types for which demand remains lukewarm.
McKees Rocks is located in western Pennsylvania (think Marcellus), population, 6,000 or so. From wiki:
In the past, McKees Rocks was known for its extensive iron and steel interests. Also, there were large railroad machine shops, and manufacturers of locomotives, freight and passenger cars, and springs, enamel ware, lumber, wall materials, plaster, nuts and bolts, malleable castings, chains and forgings, tin ware, concrete, and cigars.
The Pittsburgh, Allegheny and McKees Rocks Railroad is located in an area known as the "Bottoms."
At McKees Rocks (think Marcellus), according to the linked article:
At least 600 rail cars filled with sand arrive each month by train at Jim Lind's shipping terminal and warehouse in McKees Rocks
They're destined for Marcellus shale wells.
Each hopper car carries 100 tons of the sand, said Lind, president and co-owner of McKees Rocks Industrial Enterprises, one of a dozen companies in the region that handle sand for shale-gas drillers, much of it delivered by railroads.
“Frack sand is white-hot right now,” Sterne Agee analyst Sal Vitale said. It has been one of the principal drivers of the all-time high rail car industry backlog of 124,000 rail cars.
That includes tank cars for oil, covered hoppers for sand, grain and other agricultural products, and multi-stack cars for vehicles.
Lind's company handles 3,500 to 4,000 rail cars of sand a year. The demand required him to more than triple employment from 20 to 70 since 2009, he said.
“We've added more sites in Youngwood, Sayre and two in Ohio, Niles and Hannibal,” he said.
Switching gears, EOG is using upwards of 14 million lbs of sand to frack a single Bakken well. Divided by 2,000 lbs/ton, that works out to 7,000 tons.
7,000 tons divided by 100 tons of sand/hopper works out to 70 hopper cars. That sounds about right. A 100-unit fracking sand train for one to four Bakken wells depending on how much sand is going to be used.
A reminder: I often make simple arithmetic errors. If this information is important to you, go to the source and confirm the calculations.
This article was of interest to me for two reasons:
a reminder of the backlog in tank cars for the railroad industry
the sand-delivery industry in the Marcellus
By the way, it's my understanding the US truck manufacturing industry also has a backlog.
Using documents, emails and interviews with former wildlife officials,
the AP in articles published last year documented more than four dozen
eagle deaths in Wyoming since 2009, and dozens more in California, New
Mexico, Oregon, Washington and Nevada. Corporate surveys submitted to
the federal government and obtained by AP showed at least 20 eagles
found dead in recent years on Pacificorp wind farms in Wyoming.
Folks are worried about the sage grouse which is getting about as much protection as it possibly could, and President Obama gave blanket immunity to wind farm corporations found to be killing eagles and whooping cranes.
BNSF’s rail traffic in North Dakota is at an historic high, with
outbound train volume up by nearly 200 percent since 2009 and inbound up
nearly 120 percent.
The remarkable train volume — a train every
45 minutes through New Salem, on average — carries everything from grain
commodities to construction materials to crude oil in North Dakota’s
multifaceted boom economy.
Memo to self: send another thank you letter the folks in Nebraska, Minnesota, Iowa. Folks in New Salem need to send a letter to POTUS (see next item).
*************************
Reuters On POTUS and The Keystone
Reuters via Rigzone has a long article on why President Obama is "at least" half-wrong on the Keystone. There is way too much to provide even a paragraph; the article needs to be read in whole by those who don't understand the argument. I assume regular readers do.
Having said that, the writer fails to provide the history back to 1995 regarding the reasons for the
industry's need for the Keystone pipeline. The writer leaves out a lot but "at least" it's a start.
And again, Reuters would not have posted this article prior to the mid-term elections. Everyone is living in a post-Obama world; folks are saying things now that they haven't said in years, as they start to move POTUS off center stage of this three-ring circus.
Officials see a new propane
terminal at Hannaford as a way to combat the shortages and high prices
seen last year. The $6.5 million terminal is a project of CHS and
Central Plains Ag Services and will bring propane from the Oil Patch to
users in eastern North Dakota.
The terminal will operate under the CHS propane terminal name.
Previously, most propane marketed in eastern North Dakota was
delivered by the Cochin Pipeline from Canada, Kumm said.
Kinder Morgan
Energy Partners, owners of the Cochin Pipeline, reversed the flow of the
pipeline to deliver refined products from Illinois to Canada. This led
to shortages and high prices last fall and winter, according to Ken
Astrup, general manager of Dakota Plains Cooperative in Valley City.
The Hannaford terminal will
take delivery of propane by rail, Kumm said. The bulk of the propane
will come from a CHS-owned loading facility at Ross, and originates from
the Bakken oilfields. CHS also has suppliers in Canada for diversity in
case the supply from the Bakken is interrupted.
I didn't see the article say it specifically, but perhaps the terminal is operational; the story back in April suggested it would be up and running in time for the 2014 harvest.
Again, another "thank you" to a reader for sending me the link. The same reader sent the following story.
Burlington Northern Santa Fe railroad wants to build a second bridge
in northern Idaho to handle an expected increase in traffic that
includes coal and oil trains.
The one bridge now at Sandpoint
handles about one train every half-hour, a bottleneck for BNSF's busy
Hi-Line that connects the Pacific Northwest to the Midwest.
Montana Rail Link trains also use the single-track bridge that crosses Lake Pend Oreille where it meets the Pend Oreille River.
"It's known by rail fans as the funnel," BNSF spokesman Gus Melonas said. "And it's a choke point."
If I recall correctly, the warmists now tell us that the extent of sea ice (Antarctic, Arctic, or otherwise) no longer correlates with global warmingbut "to be honest with you" (would I ever not be honest with you?), I think one can find almost any theory or any explanation or any temperature or almost anything one wants to hear about global warming. The only thing I pretty much know for sure: the Statue of Liberty won't disappear underwater due to global warming as the National Geographic suggests.
The New York Times leadership is currently considering a new round of
buyout offers that is likely to slash at least 50 positions from the
company, and possibly several more, sources at the paper told POLITICO
this week.
The official plan is being hammered out at this week's Times Company
board meeting on the West Coast, the sources said. Executive editor Dean
Baquet, who is attending the meeting, is expected to make an
announcement as early as this afternoon or next week. The buyouts are
likely to affect both the newsroom and the business side.
The impending buyouts come amid significant personnel growth on the
Times digital side, as well as in its video department. The Times has
launched several ambitious new digital and mobile projects in recent
months and is expected to launch more in the weeks ahead.
Later, 6:41 p.m. CDT: see comments below. I mentioned this project a year ago in an earlier post. I had completely forgotten about it. I'm surprised no one wrote and asked for an update on this project. I have visited the Bakken three (or maybe four) times since September, 2013, and I have driven past that location every time, multiple times with my dad and never mentioned it to him, which means I had completely forgotten about it.
Original Post
This might be the biggest story of the year (so far): huge rail terminal to be built east of Williston. A reader sent the link. Thank you. The Bakken.com is reporting:
New Frontier LLC, a Williston, N.D.-based developer has announced
plans for a $250 million transload facility called the East Valley Rail
Project. Jason Everett, lead developer for the company, announced the
project at the recently held Williston Economic Development Summit. Once
complete, the facility will provide inbound storage and handling of
several energy related products, ranging from frack sand to tubular
goods.
The new facility, to be located east of Williston, will help centralize the oil activity in one location, says the company. The terminal will be located just east of the Halliburton-Sanjel complex east of Williston, just east of the 1804 Little Muddy Bridge, near the old salt mine.
“We looked at the location and determined that the rail only crosses
the highway at four different spots between Montana and Minot, this
[Williston] being one of the main areas that it crosses a major public
road,” said Everett.
This project will be the first rail facility with public water and
sewer and all utilities available to it. And according to Everett,
designing the facility to be large enough to take on multiple tenants
and with having most of the oil companies and oil field service
companies having their main headquarters for the Bakken in Williston
makes it “the opportune spot to be the logistical advantage from their
home-base.”
The facility will be able to store about 160,000 tons of frack sand,
will have a pipe and casing yard of about 30 acres, and will have an
extra 90 additional acres of storage for things like large tanks or rail
car storage.
I can't remember if I posted this or not, but I sent e-mail to another reader a few days ago: wit the problem they are having getting fracking sand to the Bakken, my hunch is we are going to see increased sand shipped during the relatively slower periods in the winter and then stored locally. This certainly looks what we might be seeing here.
More from the article:
This facility is the first unit train facility in western North
Dakota approved by the BNSF, which allows them to land a full train and
once those cars are needed, the facility will be able to switch cars
internally verses waiting for the railroad to switch them.
“Right now, if you have 40 cars and can only get five cars switched
per day, it takes eight days to unload them, but we’ll be able to do all
of the 40 cars in about seven hours,” said Everett.
Eastern Valley Rail will be able to hold 18 to 20 tenants and Everett
said they’ve already begun selecting clients for the facility.
Much more at the linked article including Google satellite map.
How fast could we see this? The company hopes to break ground this fall, and have first shipments by March, 2015 -- that's only about 7 months from now. And much of that construction during the legendary, frigid, North Dakota winter.
Daily Operations Report
Wells coming off the confidential list Thursday:
27578, drl, BR, Sequoia 31-4TFH, Hawkeye, no production data,
27618, drl, Slawson, Whirlwind 3-31H, Big Bend, producing,
Wells coming off the confidential list today were posted earlier; see sidebar at the right.
BNSF Railway Co. will continue making massive investments to build out rail transport for America's oil boom, Matthew K. Rose, the company's executive chairman said in an interview with The Wall Street Journal.
Mr. Rose said the railroad will open a new 10-mile stretch of track that will double-track—or parallel—existing track in its Bakken Shale region next month, and will build another 10 miles of track after that.
The segments of track are $25 million to $40 million projects, part of the $1 billion in capital spending BNSF plans this year to expand service along its Northern Corridor that cuts through North Dakota and Montana and borders the Bakken Shale oil region.
That region is where cold weather and bigger-than-expected grain and coal shipments combined with its new crude oil business to cause massive delays and rail traffic tie-ups this past winter.
These are nice stories for a number of reasons, not least of which it puts into perspective Mr Buffett's investments.
Earlier today it was reported that Mr Buffett was going to invest $15 billion in renewable energy for the tax credits. Fifteen billion dollars sounds like a lot. But here, in one little piece of the Bakken, in a little part of a sparsely-settled state, Mr Buffett is investing in at least $1 billion. And unlike investing $15 billion for tax credits which benefits a few a few BRK investors, investing in the railroad will actually improve the quality of life for hundreds, if not thousands, nay hundreds of thousands of Americans.
Albany County has issued a moratorium prohibiting the expansion crude
oil processing at the Port of Albany pending a public health
investigation.
The order was issued following a directive from Albany County
Executive Daniel McCoy citing that heating and storage of crude oil at
the port could create a "condition detrimental to the public health and
safety of the residents of Albany County."
Global Partners, a company seeking to expand the processing of crude
oil at the port, has been ordered to refrain from expanding current
operations in Albany, NY until a public health investigation is
completed.
The moratorium follows an executive order issued by Gov. Andrew Cuomo
in January, directing state agencies to conduct a comprehensive review
of safety procedures and emergency response relating to the shipment of
crude oil from the Bakken oil fields in North Dakota.
This will help the employment AND energy problem in New England.
BNSF will be making record infrastructural investments in North Dakota,
including in the Minot area, to improve rail transportation in the
state.
"In 2014 we plan to make our largest, single-year capital investment
in our company's history. Our investments of capital in expansion and
maintenance in North Dakota will be a critical part of efficiently, and
safely, facilitating the growth from the state, in particular, crude and
agriculture, and growth elsewhere on the network," Ice said.
Ice
said BNSF's maintenance investment grows as volumes grow. "In North
Dakota this year, BNSF is spending $125 million to keep the existing
tracks and facilities strong. Last year set a record for replacement and
maintenance spending in the state $112 million."
He said
replacement capital expenditures in North Dakota and elsewhere have also
been growing since 2009.
"Our planned expansion and efficiency capital
will be more than $900 million in 2014, of which $265 million will be
spent in North Dakota. This spending is part of a three-year capital
expansion plan for North Dakota. We plan to spend $396 million over
three years on the Glasgow subdivision alone that will result in over
100 miles of double track and the construction of three critical
sidings.
From the Tioga Tribune:
The work planned this season includes 46 miles of new second main track between Minot and Williston.
“In particular, crews are building a railroad bridge just east of
Tioga,” McBeth said.
“There is currently a bridge for the existing main
track and this additional bridge will be constructed for the second main
track.”
Work on the bridge portion of the project should be complete later in the spring, she said.
West of Tioga, crews have been laying track for the second main
track, she said. Work will continue on that project in stages throughout
the summer.
Specifics:
double track the line from Minot to Glasgow, MT ($162 million)
add sidings between Fargo and Grand Forks ($26 million)
add sidings between Bismarck and Glendive, MT ($14 million)
add sidings along Devils Lake ($13 million)
add sidings and an interchange track through the Port of Pembina ($13 million)
invest in Centralized Traffic Control along the Jamestown, ND, subdivision ($11 million)
add sidings along the KO subdivision, between Fargo and Minot ($8 million)
... customers were notified Feb. 20 that a predicted return to cold
temperatures would hamper equipment velocities, particularly in the
north. He said there are also problems with throughput in the Chicago
network caused by previous weather events and heavy volume. He said the
company is shifting some traffic through Memphis and St. Louis, and that
wet conditions in the Pacific Northwest have hampered unloading there
at some facilities.
U.S. past-due grain car shipments
last week increased to 11,698 throughout its system — up 632 cars from
the previous week. The U.S. average past-due car count increased to 17.9
days, up from 15.4 the previous week. A past-due shipment is every
single car that is at least four days past the “want date” requested by
the elevator or shipper.
Past-due shipments in North Dakota
increased to 5,512 — up by 451 cars from the previous week. The average
North Dakota delay is 18.6 days per car, which increased from 17 days
late the previous week.
Read the press release carefully; it is full of incredible, staggering information:
From the press release in case the link is broken:
Watco Terminal and Port Services and Great Northern Project evelopment, L. P. announce their partnership in the development and operation of a major multi-purpose rail transload terminal and railcar maintenance shop near South Heart, North Dakota.
South Heart Rail Terminal, (SHRT), will serve the energy industry and its service providers to meet the increasing demand and development of the Bakken, Three Forks, Tyler and emerging oil and gas formations. Construction is expected to start in the first half of 2014 with operations projected to begin during the first quarter of 2015.
SHRT will be strategically located just south of Interstate 94, twelve miles west of Dickinson, ND, and will offer rail, transload, and railcar maintenance services, as well as warehousing and materials storage. The Terminal will be served with national connectivity via BNSF Railway Company and will feature two double-loop tracks and twelve manifest tracks. SHRT will accommodate multiple unit trains, manifest
business, and significant long or short term railcar storage needs.
South Heart Rail Terminal will have the capability to receive and transload dry bulk commodities such as frac sand, ceramic proppants, and cement. Tubular pipe, oil field equipment, building products and other materials will also be handled at SHRT. In addition, the Terminal will provide off-loading and storage for aggregates, asphalt, and road materials.
A full service railcar maintenance facility, operated by Watco Mechanical Services, will be located on-site to provide services to tank car owners and lessees. Based on 10 year growth projections in the crude oil sector alone, there will be a need for an additional 70,000 tank cars in the US fleet with 60% of those needed for the Bakken Shale area alone. South Heart Rail Terminal’s rail car maintenance shop will provide services to assist Customers with tank car inspections, testing, qualifications, preventive
maintenance, retrofits, paint and lining. In addition, Watco Compliance Services will provide fleet management solutions, engineering and regulatory guidance to ensure ongoing safety and mechanical integrity.
Norway abandons its "much-vaunted" plans to capture carbon dioxide and store it underground: mounting costs and delay. The BBC is reporting:
The outgoing government in Norway has buried much-vaunted plans to capture carbon dioxide and store it underground amid mounting costs and delays.
The oil and energy ministry said the development of full-scale carbon dioxide capture had been discontinued.
It said it remained committed to research into carbon capture.
When the Labour Party presented the plan in 2007, it was hailed as Norway's equivalent of a "Moon landing."
Prime Minister Jens Stoltenberg and his allies lost a general election to conservatives and centrists this month, and are due to step down shortly.
Even the outgoing liberals saw the debacle it was.
*****************************
Some years ago when I noted the increasing rail traffic in North Dakota due to the oil and gas industry I opined the regional economy would be spurred by capital expenditures on improving rail and maintenance. I remember someone wrote in to comment that BNSF had been shipping grain for decades and the company would not see any increased expenses because of the oil and gas industry; maintenance and improvements would remain the same. Prairie Business is reporting:
BNSF Railway Co. plans to invest an estimated $95 million on maintenance and
rail capacity improvement and expansion projects in Minnesota this
year.
BNSF’s 2013 capacity projects in Minnesota include
terminal improvements at Northtown Yard in Minneapolis to expand rail
car classification and inspection capacity by reconfiguring tracks and
switches, expanding parking capacity at BNSF’s automotive facility in
St. Paul to support growth in new automobile traffic, as well as signal
upgrades for federally mandated positive train control.
BNSF
will continue its robust maintenance program in Minnesota, which will
include more than 1,800 miles of track surfacing and undercutting work,
and the replacement of 55 miles of rail and about 290,000 railroad ties.
*****************************
Bloomberg has a nice article on why "wind and solar can't save climate" (whatever that means; I did not know the "climate needed saving"; whatever). The entire article provides data like this:
Wind energy’s paltry power density means that enormous
tracts of land must be set aside to make it viable. And that has
spawned a backlash from rural and suburban landowners who don’t
want 500-foot wind turbines near their homes. To cite just one
recent example, in late July, some 2,000 protesters marched
against the installation of more than 1,000 wind turbines in
Ireland’s Midlands Region.
Consider how much land it would take for wind energy to
replace the power the U.S. now gets from coal. In 2011, the U.S.
had more than 300 billion watts of coal-fired capacity.
Replacing that with wind would require placing turbines over
about 116,000 square miles, an area about the size of Italy. And
because of the noise wind turbines make -- a problem that has
been experienced from Australia to Ontario -- no one could live
there.
*****************************
But don't tell that to Germany. Nature is reporting that Germany will continue its renewable program despite the facts:
But the economic challenges are daunting, with the total costs of the Energiewende
estimated to top €1 trillion. Europe's deep financial crisis looms
large over a project of that scale, warns Roger Pielke Jr, an
environmental-policy researcher at the University of Colorado Boulder.
“The German public has so far shown great willingness to pay for the
transformation, but there will be limits to that willingness, especially
if the economic climate gets rougher.”
For example:
For German consumers, the costs of that shift are apparent in their
monthly electricity bills. The statements include a litany of 'shared
costs' that are split by all households to fund the Energiewende —
and result in some of the highest electricity prices in Europe. (Heavy
industries are currently exempt from paying the surcharge.)
The
shared costs are a mechanism for promoting green forms of energy, which
are more expensive to produce than electricity from coal and natural
gas. Germany's Renewable Energy Act (EEG), the legal force behind the Energiewende,
allows owners of solar panels and wind turbines to sell their
electricity to the grid at a fixed, elevated price. Renewable-power
producers cashed in an estimated €20 billion last year for electricity
that was actually worth a mere €3 billion on the wholesale electricity
market. The difference came out of the pockets of consumers.
It will be interesting to check back in on Germany in 10 years.
*****************************
But even France can out-do the Germans in craziness (though that hardly needs repeating). Bloomberg is reporting:
France will introduce a levy on
nuclear energy as well as a tax on carbon emissions from fossil
fuels to raise billions needed to boost renewable power and
improve energy efficiency.
“All change is expensive in the short term even if it’s
beneficial in the long term,” French Prime Minister Jean-Marc Ayrault said today in a speech about the environment in Paris.
The nuclear levy will be applied to Electricite de France
SA’s existing atomic reactors, he said. The carbon tax will be
introduced “progressively” on fossil fuels in order to earn 4
billion euros ($5.4 billion) in 2016.
The country gets
about three-quarters of the power it produces from EDF’s 58
nuclear reactors, more than any other nation. The energy
transition will cost an estimated 20 billion euros a year,
Hollande said yesterday.
Wow.
I can't think of a more regressive tax than increased taxes on utilities.
French President Francois Hollande saw his approval ratings fall to
their lowest level so far in a monthly poll that showed less than a
quarter of voters were satisfied with his actions.
Taking a page from President O'Bama's playbook:
The poll also showed Hollande's ratings among supporters of the
Green party had slid by 19 points since last month, a sign of growing
tensions between Hollande's Socialists and their Green allies in
government.
Hollande this week outlined plans to slash fossil fuel use,
supported by a new carbon tax, in an announcement seen as aimed at
reassuring the Green party.
With U.S. crude oil producing at record amounts and outstripping
pipeline capacity, the country is relying heavily on railroads to move
new crude oil to refineries and storage centers, reported the U.S.
Energy Information Administration (EIA) Wednesday.
The total amount of crude oil and refined products being transported
by rail is close to 356,000 carloads during the first half of 2013, up
48 percent from the same period last year, according to Association of
American Railroads.
“U.S. weekly car loadings of crude oil and petroleum products
averaged nearly 13,700 rail tankers during the January to June 2013
period. With one rail carload holding about 700 barrels, the amount of
crude oil and petroleum products shipped by rail was equal to 1.37
million barrels per day during the first half of 2013, up from 927,000
barrels per day during the first six months of last year. Crude oil
accounted for about half of the 2013 daily volumes," reported AAR.
"Increases in rail transportation multifactor productivity can be
traced to technical progress, such as improved capital inputs and
technological changes in the form of improved methods of service
delivery. Improved technology for locomotives, freight cars, and track
and structures have increased reliability and reduced maintenance
needs," added the United States Department of Transportation.
A large portion of the produced crude oil is from North Dakota where
there is not enough pipeline capacity to move supplies, therefore
dependency on delivery of oil by rail is substantial. North Dakota
currently ranks as the second largest oil producing state after Texas,
reported EIA.
Increased shipment of crude oil by rail is making the US Department
of Transportation examine its tank car standards, and possibly could
result in a proposal for new requirements by the yearend, an American
Petroleum Institute official said.
Cindy Schild, API’s downstream operations senior manager for refining
and oil sands, said the effort was under way before a runaway train
carrying Bakken crude to a Canadian refinery derailed early on July 6 in
Lac Megantic, Que., resulting in fires and explosions that killed at
least 15 people and left another 60 people missing.
A spokesman for DOT’s Pipeline and Hazardous Materials Safety
Administration confirmed that the agency is considering amendments to
current regulations that would enhance rail safety, including for the
DOT Specification 111 tank cars, and further clarify the regulations.
“This is a tragic incident, and we sympathize with all the losses
there. It’s important to learn from such events,” Schild said. “DOT is
evaluating new specifications for tank cars transporting combustibles
including crude oil, and we will be working with them on it.”
North Dakota's capacity to export oil by rail has jumped more than 50 percent in June as shippers in the state increasingly turn to mile-long trains to move crude to markets not linked by pipelines.
The
increase comes with a pair of crude-to-rail facilities built by Texas
companies to move oil from the rich Bakken and Three Forks formations in
western North Dakota's oil patch.
North Dakota now has the ability to ship at least 470,000 barrels of oil
daily by rail, up from about 310,000 barrels. The capacity could
increase to 710,000 barrels by year's end with the addition of two other
planned crude-to-rail projects.
The press release continues:
Houston-based Musket Corp. increased capacity at its crude-to-rail
facility at Dore from 10,000 barrels to 60,000 barrels per day, with the
first full shipment leaving the terminal in early June.
Musket built the facility in 2008 and had been sending small so-called
manifest shipments of North Dakota crude. The company now is loading
full unit trains which typically consist of up to 104 railcars laden
with 60,000 barrels of crude.
"We have successfully loaded and
returned our initial unit trains to the Gulf Coast, East Coast and
Canada from Dore with turn times of 10 to 17 days," Turner said.
And then this:
Rangeland Energy LLC, which is based in Sugar Land, Texas, began
shipping crude-laden trains from its facility near Epping earlier this
month.
The facility, which includes five 120,000-barrel storage
tanks and a sixth near Tioga, had been under construction for about a
year, said Casey Nikoloric, a company spokeswoman.
The terminal has the capacity to ship in excess of 120,000 barrels daily by rail, Nikoloric said.
And still more pipeline projects:
Kringstad said while six major pipeline projects are proposed to
move North Dakota crude, railroads have taken a formidable foothold in
the state.
I still vividly recall the comment from a reader two years ago who opined that crude-by-rail would be a temporary phenomenon. Okay.
