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October 14th, 2012:

Natural gas eyed as fuel for trains

6:09 p.m., Sunday, October 14, 2012

Natural gas eyed as fuel for trains

Zain Shauk
Houston Chronicle
The Canadian National Railway is experimenting with natural gas as a train fuel, which involves adding a liquefied natural gas tank behind the locomotive. The switch from diesel could save money.

Houston — On a 300-mile stretch of railroad in the plains of eastern Alberta, a test train chugs across the landscape burning a fuel that once made sense only to environmentalists.

It runs on natural gas. And today, that makes sense to business leaders whose top priority is cutting costs.

Over the past two weeks, train industry executives and others have been talking more about natural gas, as meetings in Houston and the Chicago area highlighted bubbling interest in a fuel that could slash one of railways’ top costs.

Representatives from major railroad companies and related manufacturers met in private at a Houston hotel conference room last month to talk about how to push forward what could be the next great shift in train technology – a cataclysmic transition similar to the move decades ago from coal to diesel power.

Although rail companies have been coy in public about the potential of natural gas for locomotives, citing nascent technology and few real-world examples of gas-powered trains, they are exploring the option aggressively.

“The interest level, as you would assume, is very high,” said Doug Longman, a researcher at the Argonne National Laboratory near Chicago who was at a recent meeting on the subject and has worked on various diesel engine technology projects over the past 30 years. “The railroads would really like to be able to use natural gas in their locomotives. It’s a cost issue.”

Diesel’s costs

Union Pacific, the nation’s largest publicly traded railroad operator, says diesel pushed its fuel and utilities costs to $3.6 billion last year, accounting for 26 percent of its overall expenses, according to filings with the U.S. Securities and Exchange Commission.

In 2001, fuel and utilities costs were 13 percent of the company’s expenses and in 1999, they were 9 percent of all costs, according to SEC filings.

That increase, a result of climbing diesel prices, has led railroads to invest in software and engine upgrades that can shave gallons off of their total fuel usage, said Keith Schoonmaker, an analyst for Morningstar.

“Slight improvements do mean big savings for sure, but I don’t know what kind of cost savings would be available for natural gas,” Schoonmaker said.

Railroad companies seem to believe natural gas prices are going to remain low and stable because of booming production of gas from shale plays, giving it a consistent price edge over diesel – which now sells for $1 to $2 more per gallon than an equivalent amount of natural gas.

With industry leaders Union Pacific and privately held BNSF Railway each consuming around 1 billion gallons of diesel annually, even a difference of a few cents per gallon can mean tens of millions of dollars in savings.

But fuel costs aren’t the only consideration.

To make the switch to natural gas, a railroad would have to modify its diesel-electric locomotives, a process that today costs $600,000 to $1 million, said Normand Pellerin, assistant vice president for environment and sustainability for Canadian National Railways, which is running the test train in Alberta.

The conversion cost is expected to fall with increased application and interest from companies, Pellerin said.

Schoonmaker said a new locomotive costs about $2 million.

Caterpillar and natural gas engine manufacturer Westport have announced plans to develop and sell natural gas-powered engines for locomotives, although they haven’t announced timetables for those products.

“It has to be something that the whole industry is going to be moving on to, but our projection is that, yes, it will be eventually moving on to gas,” Pellerin said. “That’s because we don’t see how diesel prices will come down over the years. It’s all about pricing.”


But it also involves the process of actually moving and storing liquefied natural gas so that trains can refuel along the tens of thousands of miles of railroad in the United States.

The idea is to reinvent a relic of a bygone era: Tender cars, once used to carry coal and wood behind steam-powered locomotives, could soon come into production in the form of large tanks for liquefied natural gas.

Gas has intrigued train companies for decades as a possible alternative to diesel, but until recently costs have been too high or too volatile to inspire the kind of groundswell of support and investment needed to push the industry forward.

BNSF tested natural gas as a fuel for locomotives about 20 years ago, in an outdoor experiment at a rail yard. BNSF spokesman Steven Forsberg declined to comment about the test except to say that “the same issues and questions are involved in the current evaluations.”

Other companies were also wary of expressing too much optimism about natural gas.

“While this presents near-term opportunities for the transportation companies, there are significant challenges that need to be addressed before Union Pacific could run trains on natural gas,” said spokeswoman Raquel Espinoza-Williams.

Although natural gas is a fossil fuel that contributes to emissions, many environmentalists have long supported it as a cleaner-burning bridge fuel toward renewable energy sources. Over the past year, however, concerns about methane leaked from production and storage operations have brought opposition to the fuel as a potentially more environmentally damaging than diesel and gasoline. Methane, the dominant component of natural gas, is a potent greenhouse gas.

That makes the benefits of using natural gas in locomotives a little hazier, said Drew Nelson, clean energy project manager for the Environmental Defense Fund.

“From an air quality perspective, the science suggests that natural gas has significant benefits compared with other fossil fuels, but from a climate perspective more research is needed,” he said.

Zain Shauk is a Houston Chronicle staff writer. E-mail: