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Rail is no longer seen as just a stopgap for transporting oil until pipelines are built. Case in...

Rail is no longer seen as just a stopgap for transporting oil until pipelines are built. Case in point: Kinder Morgan Partners' (KMP) proposed 277K bbl/day Freedom pipeline would be the first to bring light, sweet oil from Texas' Permian Basin to California, but refiners Valero (VLO), Tesoro (TSO) and Phillips 66 (PSX) won't sign contracts to use Freedom, preferring the flexibility of rail cars and barges.
Comments (28)
  • dunnhaupt
    , contributor
    Comments (414) | Send Message
     
    Rail adds only a few extra cents to the consumer price of a gallon of gas at the pump.
    24 May 2013, 02:58 PM Reply Like
  • Panhandler1949
    , contributor
    Comment (1) | Send Message
     
    More like $0.20/gal.
    26 May 2013, 04:11 PM Reply Like
  • Trainer
    , contributor
    Comments (136) | Send Message
     
    Is this a flaw in the tollway analogy for pipelines?
    24 May 2013, 03:17 PM Reply Like
  • crash9010
    , contributor
    Comments (103) | Send Message
     
    Not really it is more about refiners not having a problem using rail. I don't see rail replacing enough of the pipeline needs to cause large disruptions to the likes of KMP.
    24 May 2013, 04:18 PM Reply Like
  • Darold
    , contributor
    Comments (22) | Send Message
     
    I've lived near the Mississippi and Ohio rivers for over 25 years as a pleasure boater/fisherman, and there has long been controversy about the US government Corp of Engineers and our tax dollars providing locks, dams, 9' river channels as a "freebie" for the barge companies to transport goods. I'm guessing that if they had to pay the real cost of all of that, then pipelines would be a great bargain.
    24 May 2013, 04:42 PM Reply Like
  • DRID
    , contributor
    Comments (2) | Send Message
     
    This needs an explanation of "the flexibility of Rail Cars and Barges".
    Without the knowledge of the whole transfer procedure from well head to Rail Car or Barge and then to Refiner it would appear that turning a spigot is simpler. Can an analogy be made of a homeowner getting his energy source from Fuel Oil distributed by a local supplier by truck or from Natural Gas piped in from a municipal distribution system? Me thinks there is more to this than meets the eye and maybe the Refiners should be asked for their reasoning.
    24 May 2013, 05:36 PM Reply Like
  • hhmcdon
    , contributor
    Comments (103) | Send Message
     
    "Freedom pipeline would be the first to bring light, sweet oil from Texas' Permian Basin to California, but refiners Valero (VLO), Tesoro (TSO) and Phillips 66 (PSX) won't sign contracts to use Freedom, preferring the flexibility of rail cars and BARGES.
    BARGES?? TEXAS TO CALIFORNIA?? Help me understand how??
    24 May 2013, 05:36 PM Reply Like
  • Randal James
    , contributor
    Comments (2486) | Send Message
     
    hhmcd

     

    This is the general idea and it adds needed jobs!

     

    http://1.usa.gov/16fhpKR
    24 May 2013, 06:47 PM Reply Like
  • durango58
    , contributor
    Comments (272) | Send Message
     
    KMP already owns rail out of the Bakken. The Freedom is a non-issue to me. It's open season and Kinder never builds or expands a pipeline unless 20 year commitments are signed. They will do quite well without the additional 277,000 bbl throughput. So who cares?
    24 May 2013, 05:51 PM Reply Like
  • BlueSeas
    , contributor
    Comments (154) | Send Message
     
    The 100+year war between pipelines and rail lines continue. Maybe Cramer was right and Union Pacific should be in my portfolio next to KMP,EPD et al:)
    24 May 2013, 07:45 PM Reply Like
  • Randal James
    , contributor
    Comments (2486) | Send Message
     
    Blue,

     

    Not as farfetched as you think. GE and others are working on LNG engines for railroads. Said to be cheaper and cleaner to run and - depending where you'd be beginning the journey - maybe a free tank of gas!
    24 May 2013, 07:54 PM Reply Like
  • Sumflow
    , contributor
    Comments (3641) | Send Message
     
    If it takes many years and billions of dollars to make a plant that can turn natgas into liquid, and it must be contained at freezing cold. How is the train suppost to fuel up at the beginning the journey?
    27 May 2013, 07:02 PM Reply Like
  • Randal James
    , contributor
    Comments (2486) | Send Message
     
    Sumflow,

     

    If you've ever filled a propane tank for the barbecue, you have a good idea of how it works. There are already certain hybrid trucks running on CNG - Compressed Nat'l Gas.

     

    http://bit.ly/1asy0rg

     

    For heavier duty engines, Cummins is working on LNG because it reduces the volume of natural gas to 1/600th of its original volume. This will be used on long haul trucks and may become the major source for transport if the economics remain favorable.

     

    It has the same potential in powering trains

     

    http://bloom.bg/Ziwke5

     

    While it is only in the last few years that we've discover this abundance, it is clear that domestic natural gas is plentiful and cheaper to use than continued use of scarce oil. There are marginal coal seams throughout the west where fracking has not even been tried yet. One well in Eastern Colorado - further south than the big fields of a few years ago, came in at 1700 boe/day.

     

    I'm not the scientist, but the gas is kept under substantial pressure so if you've ever held a can of compressed air up to your hand and sprayed, you already know that the compression lowers the temperature substantially. LNG may have to be refrigerated, but not like trying to freeze a hot tub of chili in the freezer, more like making sure the ice cream doesn't melt.

     

    Last, regarding the "billions" in costs, I'd suggest these small plants from GE will reduce that by at least two decimal places, perhaps three. See the text and models below:

     

    http://bit.ly/1asy0ri
    27 May 2013, 09:40 PM Reply Like
  • jpmj4847
    , contributor
    Comments (507) | Send Message
     
    yes Randal, not as farfetched as one would think, indeed. The natural gas boom is big, but the major oil companies are holding the USA back. Mr. Cramer and a few are paying attention when Mr. W. B. talks and puts his money into rail and LNG engines. One only has to look at the bigger picture or out side the box. Also the war with the pipelines....PSX and many other are not signing contracts because of the toll fees collected by the pipeline's companies. I like BlueSeas commented and do have both plays in my portfolio. Thanks SA and MC for getting everyone thinking and talking. jpmj4847
    24 May 2013, 09:43 PM Reply Like
  • Sumflow
    , contributor
    Comments (3641) | Send Message
     
    Rail in very flexible in the short term, you can move products from the places of greatest supply to the refiners in greatest need.

     

    Listen to Kinder Morgan explain that the flexibility of rail cars and barges is a temporary solution for oil producers.

     

    KM PipeRail: http://bit.ly/19bsOKz
    24 May 2013, 09:48 PM Reply Like
  • Hendershott
    , contributor
    Comments (1511) | Send Message
     
    With the North Dakota oil selling at a discount to Permian, a pipe from the Permian doesn't work out to be less expensive than rail from North Dakota and there's no 20 year contract with rail.
    24 May 2013, 10:10 PM Reply Like
  • toomuchgas
    , contributor
    Comments (548) | Send Message
     
    Many pipelines are take or pay whereas with rail you don't pay unless you move cargo.
    24 May 2013, 11:00 PM Reply Like
  • hhmcdon
    , contributor
    Comments (103) | Send Message
     
    With California being such a difficult-high-cost state to do business the refiners may wish soon to refine elsewhere and ship finished product from Texas rather than crude. Signing a 20 year commitment to send crude to California may seem too bold.
    25 May 2013, 05:04 AM Reply Like
  • jerrywengler
    , contributor
    Comments (425) | Send Message
     
    I put my money with KMP. Warren Buffet put his with Santa Fe. My guess is we'll both do OK irregardless the decisions of the moment when you look at the oil and gas future of America.
    25 May 2013, 10:33 AM Reply Like
  • durango58
    , contributor
    Comments (272) | Send Message
     
    Regardless means " without regard" by itself. There is no such word as "irregardless."
    26 May 2013, 01:29 PM Reply Like
  • Sumflow
    , contributor
    Comments (3641) | Send Message
     
    Irregardless is a word commonly used in place of regardless or irrespective, which has caused controversy since the early twentieth century, though the word appeared in print as early as 1795.

     

    Irregardless is an erroneous word that, etymologically, means the opposite of what it is used to express.

     

    Probably a blend of irrespective and regardless. Perhaps inspired by the colloquial use of the double negative as an emphatic.

     

    http://bit.ly/113ZZJm
    27 May 2013, 02:02 PM Reply Like
  • durango58
    , contributor
    Comments (272) | Send Message
     
    Agreed. It's just irritating at times; like people saying, "can't hardly" when they mean "can hardly."
    27 May 2013, 02:19 PM Reply Like
  • 102ndreg
    , contributor
    Comments (4) | Send Message
     
    Cannot figure the costs- seems labor to fill rail oil tanks and crews to service along the entire line would boost costs vis a vis pipelines.; also mile long oil trains (which we've had in this area of PA) are likely to be more a spill problem then pipeline breaks!. edwhauck
    26 May 2013, 08:10 AM Reply Like
  • 102ndreg
    , contributor
    Comments (4) | Send Message
     
    just an old bird (90) with wide interests and a new desktop computer that absorbs lots of time.
    26 May 2013, 08:12 AM Reply Like
  • Sumflow
    , contributor
    Comments (3641) | Send Message
     
    The Crude Loves Rocking Rail series covers crude by rail “soup to nuts” including loading terminals, destination terminals and transport economics.

     

    If you really want to know see: http://bit.ly/13dLRzh
    27 May 2013, 06:37 PM Reply Like
  • chebacan
    , contributor
    Comment (1) | Send Message
     
    irregardless of what you say the word exit and is widely used irregardless of its redundancy. some people like the sound of it and insist on using it irregardless of what others may think.
    27 May 2013, 05:36 AM Reply Like
  • Sumflow
    , contributor
    Comments (3641) | Send Message
     
    Durango58 :> There is no such word as "irregardless."<

     

    Of course Irregardless is a word: http://bit.ly/12JrQQq
    27 May 2013, 02:19 PM Reply Like
  • Sumflow
    , contributor
    Comments (3641) | Send Message
     
    Data from Genscape showing rail terminal loading volumes in North Dakota and pipeline receipts into the Enbridge North Dakota pipeline suggest that shippers are switching barrels from rail back to pipeline this month (May 2013).

     

    http://bit.ly/11ovRr6
    29 May 2013, 06:11 AM Reply Like
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