INSIGHT-After oil, natural gas may be next on North American rails

Mon Jun 16, 2014 1:00am EDT
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By Edward McAllister

NEW YORK, June 16 (Reuters) - As politicians debate the dangers of a massive increase in oil carried by rail in North America, railroads and energy producers are considering the same for natural gas.

Buoyed by the unexpected success of crude by rail, companies are beginning to consider transporting natural gas as remote drilling frontiers emerge beyond the reach of pipelines, executives said.

Natural gas by rail is years away and likely to face strong public resistance after a series of explosive crude-by-rail accidents. But the potentially multibillion-dollar development could connect gas-rich regions like North Dakota with urban centers, presenting an opportunity for railroads, drillers and tank car makers already cashing in from hauling oil on trains.

It could also be a cure for environmentally unfriendly flaring, a growing problem in far-flung areas where more than $1 billion of natural gas produced alongside oil is burned off each year for lack of processing plants or pipelines that can take years to build.

"Everyone is talking about moving gas by rail," said David Demers, chief executive officer of Westport Innovations , which is developing technology for natural gas-powered locomotives. "They see this as a large opportunity and have their pencils out to see how it could work."

Demers said Berkshire Hathaway's BNSF was one railroad considering the move.

BNSF declined to comment on its plans, but a spokeswoman said it would take time for any development of gas by rail.

Transporting gas by rail, most likely as cryogenic liquefied natural gas (LNG), faces obstacles. The technology is in its infancy, and so far no tank car is permitted to carry the fuel on U.S. rails. Nor are there enough plants that convert natural gas to LNG to support a robust gas-by-rail market, experts said.   Continued...