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NatGas by Rail Not on Radar in North Dakota, Official Says

Crude oil by rail transportation continues on its robust path in North Dakota, tied closely to the spread between Brent and WTI prices, but natural gas-by-rail shipment is still just a concept being explored by some of the U.S. railroads, according to Justin Kringstad, director at the North Dakota Pipeline Authority, which keeps track of oil/natural gas transportation.

For the most recent statistics covering April, oil rail transportation was down slightly but still represented 63% of the crude transportation for the month, Kringstad said. The rest was shipped via pipelines.

"In April we saw a tightening of the Brent-WTI price differential, and that correlated to a rise in amounts of oil shipped via pipeline," said Kringstad, noting that volumes of crude shipped by rail have "held steady" at 700,000 to 715,000 b/d. The Brent-WTI spread has stayed in the $5-$7/bbl range, he said.

Earlier in June, Association of American Railroads CEO Edward Hamberger touted the all-out effort by rail operators to improve the safety of shipping crude oil by rail. And the head of Vancouver, Canada-based Westport Innovations, which is developing a natural gas-powered locomotive, predicted that natural gas shipments by rail are coming.

In response to a question on the state's webinar Tuesday Kringstad said he is unaware of any specific plans to move Bakken gas via rail.

"Moving gas by rail is not something I have heard about for North Dakota," Kringstad said. "In this state our challenge is primarily in localized gathering [pipeline] systems. Gas by rail would involve liquefied natural gas (LNG) in long-haul shipments addressing the gas transmission side of the equation.

"So far, I have not heard of anyone raising rail as a transportation option."

A spokesperson for Berkshire Hathaway's BNSF Railroad told NGI's Shale Daily that she was unaware of any plans by her railroad and its customers to ship natural gas by rail. Demers specifically said that BNSF was one of the railroad companies looking at the new market.

Nevertheless, as reported by Reuters, the railroads and federal regulators have an ongoing task force looking at potential future standards for LNG shipment by rail, but the bulk of the focus remains on the crude oil shipments following a series of derailments in the past 18 months (see Shale DailyMay 7).

Adding LNG is expected to face a number of obstacles, although as BNSF's spokesperson pointed out, the freight railroads are common carriers so they don't have the flexibility of refusing to carry a cargo as long as regulations permit its shipment in interstate commerce.

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