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1 United States Department of Energy Quadrennial Energy Review Rail’s Role in Energy Infrastructure and Utilization August 8, 2014

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  • 1

    United States Department of Energy Quadrennial Energy Review

    Rail’s Role in Energy Infrastructure and Utilization August 8, 2014

  • 2

    Overview

    What we burn: •  Rail is a large energy consumer continually improving

    efficiency

    What we haul: •  Rail is critical to the transportation of energy and energy

    savings

    Reliability of rail: •  Rail investment to safely and efficiently meet existing and new

    demand

  • What we burn: Rail is a large energy consumer

    •  BNSF uses 1.3 billion gallons of diesel per year •  Second largest user behind U.S. Navy

    •  Newest locomotive fleet in industry with approximately 7600 units, improving fuel efficiency and lower emissions; in last 10 years:

    •  New: Over 3,300 units •  Remanufactured: Over 2,800 units

    •  Increasing use of Automated Gate technology and electric wide-span cranes at BNSF intermodal facilities

    •  Reduces idling emissions and eliminates local emissions from cranes

    3

  • What we burn: Liquefied natural gas-- BNSF pilot •  Burlington Northern successfully tested natural gas locomotives using LNG tenders in the early

    1990s

    •  Current testing is “duel fuel” – optimizes fuel consumption and maximize operating range on parts, or all, of network

    •  BNSF is independently working with test locomotives from both of the primary domestic locomotive manufacturers—GE Transportation and EMD/Caterpillar

    •  Revenue service dynamic testing underway in Colorado and California utilizing diverse operating conditions

    •  Regulatory issues include siting and operating natural gas fuel infrastructure, locomotive and tender-specific regulatory issues, including Environmental Protection Agency (EPA) engine emission criteria, FRA rail operating rules, PHMSA tender design and Surface Transportation Board (STB) economic regulation

    •  Economic value based on diesel-LNG price spread

    •  Successful implementation not dependent on public incentives, and will lead surface transportation conversion

    • 

    4

  • Sources of BNSF Growth

    2013 Units

    What we haul: Traffic mix has changed 2006-2013

    5

    (2,315)   (2,535)  

    (2,230)   (956)  

    (558)  

    (183)  

    (1,874)  

    Volume  in  Thousands  

    2006  Volumes  =      10,637  2013  Volumes  =      10,093  

    Domes&c  Intermodal  represents  largest  number  of  units  and  growing  rapidly.  

  • 8/13/14 6

    What we haul: Intermodal fuel efficiency

    From an environmental, economic, congestion and safety perspective, rail is the best way to move goods – today and in the future *

    One BNSF intermodal train removes more than 280 long-haul trucks from our nation’s highways

    Each year BNSF’s customers reduce carbon emissions by 30 million metric tons vs. highway

    Rail is over three times more fuel efficient than long-haul trucks

  • • US coal demand strong- Western coal pricing, natural gas pricing and economic demand up

    • Coal generation up almost 7% year-over-year through May.

    • BNSF has invested to ensure resilient and efficient coal network: $3.5 billion since 1996 to ensure reliability of coal network.

    • Historic $9 billion capital plan (2013-14) provides capacity on key coal routes.

    7

    What we haul: Growing coal demand

  • What we haul: Coal sets in service begin rise in mid-2013

    Source: Internal BNSF data

    300

    350

    400

    450

    500

  • 9

    What we haul: Efficient transportation enables PRB coal use

    Source: Ventyx

  • 10

    What we haul: BNSF Ethanol Destination Franchise

    Unit Train Destinations Existing Watson, CA Birmingham, AL East Coast – via Chicago Texas - Ft Worth & Texas Gulf

    Manifest Lanes Northern California Pacific Northwest Mountain Zone – UT, NM, MT, CO IL / MO – Chicago, St Louis

  • 11

    What we haul: North American oil production

    0

    500

    1,000

    1,500

    2,000

    2,500

    3,000

    3,500

    4,000

    8,000

    8,500

    9,000

    9,500

    10,000

    10,500

    11,000

    11,500

    12,000

    Q1 - 2010

    Q2 - 2010

    Q3 - 2010

    Q4 - 2010

    Q1 - 2011

    Q2 - 2011

    Q3 - 2011

    Q4 - 2011

    Q1 - 2012

    Q2 - 2012

    Q3 - 2012

    Q4 - 2012

    Q1 - 2013

    Q2 - 2013

    Q3 - 2013

    Q4 - 2013

    US & Canada Oil Production US & Canada CBR Shipments

    3,333

    980

    Total US & Canada oil production growth Kbls/d

    US & Canada RR CBR growth Kbls/d CBR handled

    about 1/3 of the increase in oil production

  • What we haul: Crude-by-rail origins & destinations

    12

    1 Origin Facility 2009

    1 Destination Facility

    3 Origin Facilities 2011

    5 Destination Facilities

    9 Origin Facilities 2012

    15 Destination Facilities

    10 Origin Facilities 2013

    10 Destination Facilities

    7 Origin Facilities 2014

    10 Destination Facilities

  • Reliability of rail: Rail is providing unique value

    •  Market Distribution Flexibility allows producers to ship in multiple constructs and to refineries throughout the U.S.

    •  Investments in infrastructure, people and process ensures Reliable Transportation Services for producers.

    •  Decades-long commitment to Safe Operating Practices helps prevent accidents in the first place.

    13

  • Reliability of rail: Investing in infrastructure to support demand

    $ Billions

    $2.3 $1.9

    $2.1 $2.0

    $2.6 $3.1

    $3.8 $3.4

    $3.4 $3.3

    $2.7 $3.6

    $3.6 $4.0

    $5.0 $46.8

    2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014F Total

    14

    Capital Commitments 2000-2014 Total

  • 15

    Reliability of rail: Ensures Capability and Dependability

    46%

    18%

    32%

    4%

    Core Network and Related Assets Expansion and Efficiency Locomotive, Freight Car, and Other Equip PTC

    BNSF’s 2014 Capital Commitment $5 Billion

    $2.3 billion

    Core Network and Related Assets

    $1.6 billion

    Loco, Freight Car & Other Equip

    $900 million

    Expansion & Efficiency

    $200 million

    PTC

  • Reliability of rail: North Dakota- expanding capacity to meet demand

    363,601 Total Carloads

    Over $600 million in infrastructure investment (2013-2014) 115 miles of new track 4 new sidings

    0 10 20 30 40 50 60 70 80 90

    100

    2011 2012 2013 2014 2015 2016 2017 2018 2019

    Line capacity and projected volume (trains per day)

    Glasgow subdivision (Minot - Snowden)

    Forecast

    Capacity

    16

  • Reliability of rail: Continuous risk reduction

    17

    BNSF vs. Industry Reportable Rail Equipment Incident Rate (Incidents per Million Train Miles)

    3.4 3.6

    3.5 3.3 3.3

    3.2

    2.6 2.6 2.7

    2.2 1.9

    2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

    BNSF RREI Rate

    Source: FRA Ten Year Overview – 2013 Data Through October

  • Reliability of rail: Crude by rail safety

    •  2013 and 2012 safest years on record, with record volumes

    •  Growing crude volumes delivered safely (99.997% shipped without incident)

    •  •  Over 65,000 first

    responders trained in their BNSF communities since 1996; 1,500 oil incident trainers trained by rail industry in 2014

    DERAILMENT PREVENTION

    MITIGATION: APPRIOPRIATE

    TANK CAR

    EMERGENCY RESPONSE

    18

  • Reliability of Rail: Industry leadership and careful regulation

    19

    •  Reasonable train speeds are essential to commerce

    •  Feasible and effective DP braking systems

    •  Crude fleet transition first priority

  • 20

    What will ensure reliability?

    What’s needed to fully capture the potential that rail holds for energy reliability:

    !  Tank car regulations that can be implemented creating certainty in the marketplace;

    !  Reasonable speed restrictions that enhance safety, but do not encumber 95% of the freight traffic on America’s freight rail network;

    !  Regulatory agencies to cooperatively work with us to facilitate the conversion to LNG.

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