Double Crown Resources Inc. (fka DDCC)

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BNSF pledges $6 billion in railway improvements

David Murray, [e-mail]
10:10 p.m. MST December 3, 2014

News Link: http://www.greatfallstribune.com/story/news/local/2014/12/04/bnsf-pledges-billion-railway-improvements/19876403/

Three of the top industries driving Montana’s economy — coal, agriculture and oil — rely heavily upon rail to deliver their products.

However, industry executives have increasingly voiced concerns over the past two years about the nation’s largest rail carrier, Burlington Northern Santa Fe’s ability to bring those products to market in a timely and cost-effective manner.

“The Northern Tier is suffering the worst service meltdown in modern history,” Northern Plains Resource Council rail consultant, Terry Whiteside said in a 2013 interview with the Billings Gazette, “and it started with surging … coal and oil shipments in 2012.”

The explosive growth of oil field production in North Dakota — which is now only second to Texas in total domestic oil production — combined with record wheat harvests and a resurgent coal industry have prompted a rail capacity shortage in Montana.

This became particularly noticeable last fall, when the 2013 wheat crop began making its way to grain terminals in the Pacific Northwest. U.S. corn farmers produced a record crop that year. Canada’s grain crop was 50 percent larger than in 2012, and the Northern Tier wheat crop surpassed $1 billion in value for the fourth time in five years.

Both grain cars and track space were in short supply, and many elevators were forced to store thousands of tons of grain on the ground — potentially reducing both its quality and value.

On Wednesday, a senior executive with BNSF told those in attendance at the Montana Grain Growers Association that the nation’s largest railroad is taking these shortfalls seriously.

“The absolute answer to all of this is, we’re going to expand the railroad,” said John Miller, vice-president of Industrial Products Sales for BNSF. “Energy expansion, coal expansion, truck-to-rail and grain expansion.”

Miller noted that BNSF has spent $9.5 billion in the past two years on railway infrastructure improvements, and that a significant proportion of that has been dedicated to their line between Chicago and the Pacific Northwest.

The improvements include the construction of oil rail terminals in North Dakota, completion of 55 miles of double track between Minot and Glasgow and improved grain pickups at Montana’s larger shuttle loading facilities.

In 2013, BNSF had as many as 10 rail construction projects going at one time on this section. Many involved building or expanding new sidings to accommodate the 7,000-foot shuttles, to allow these mile and a quarter grain shipments to pause momentarily while another train passes.

“We are in an unprecedented time of rail capital spending in this country,” Miller said. “It is being fed by rail volume growth and demands for rail. In 2015 we’re going to spend $6 billion on capital spending, on a company base of revenue of about 23- to 24-billion dollars. Never in the history of past run railroads have we seen the capital spent like we’re spending right now.”

The 2015 expansion plans include an additional 60-miles of double track going across North Dakota and eastern Montana.

“It’s a big game-changer for us out here,” Miller said. “Instead of having to shut that railroad down eight hours at night doing maintenance — which we have to do every year at summer — now you can shut one side of it down and the other side just keeps flowing trains through.”

But the shipment of raw materials out of the upper Midwestern United States is more complex than simply laying track. Congestion on the northcentral Montana rail lines has been exacerbated in recent years by the Williston Basin oil boom.

Oil production in the Bakken is now approaching 1 million barrels a day, but as recently as 2008 North Dakota didn’t have a single rail terminal capable of handling crude oil shipments. Now it has eight, each capable of loading 315,000 barrels of crude oil daily.

Demand for rail space to transport oil tankers has taxed BNSF resources. Many look to Congressional approval of the Keystone XL Pipeline to mitigate the congestion, but Miller said oil transfers to the trans-America project will likely have a marginal effect on rail traffic.

“Keystone is really about Canadian oil,” he said. “If it happens, about 85 percent of that pipeline will be Canadian, with maybe 15- to 20-percent Bakken oil going through eastern Montana. Yes, it could affect our volumes in the Bakken, but only slightly.”

Miller added that BNSF supports approval of the Keystone pipeline because of its economic value. His ultimate message to Montana grain growers was that BNSF is committed to their industry and will continue to make infrastructure improvements in the years to come.