Railway chief says Keystone XL pipeline would cut freight revenues

Allowing the Keystone XL pipeline to move forward would cut into the revenue of rail freight operators that transport oil and other liquids, but there would still be plenty of growth opportunities for cost-conscious operators, BNSF Railway CEO Matthew Rose said Wednesday.

Rose told a lunch gathering at the annual Summer North America Prospect Expo at the George R. Brown Convention Center in Houston that pipelines present increasing competition to his company and his peers.

“We know that rail on the surface is without a doubt the most efficient and lowest price, but we know that when we compete with the pipelines, we are the higher cost,” Rose said.

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That’s one reason, he said, BNSF is looking to use liquefied natural gas to fuel some rail cars as part of a cost-cutting effort to make transporting freight by rail more attractive to oil producers and refiners.

Crude currently makes up about 4 percent of BNSF’s freight volume. But even with competition, that is expected to grow to 7 percent or 8 percent over the long-term, Rose said. The growth of shale plays is a major reason for that, he said, and BNSF is making the investments to handle that load.

The company has 17 origin facilities serving Western shale plays.

“We are anticipating more growth, making sure we are prepared to handle it,” Rose said.

Rose said rail offers distribution flexibility for producers and refiners. That makes the ups and downs of the energy industry a key focus for BNSF.

Fuel is now about 30 percent of the company’s costs, as BNSF burns 1.4 billion gallons (the equivalent 33.3 million barrels) of oil a year.

At the same time, it hauls 600,000 barrels of oil per day and that is expected to increase to 800,000 barrels per day by the end of the year, Rose said.

“At BNSF, we put oil into two buckets, the oil that we burn and the oil that we haul,” he said.

Fort Worth-based BNSF Railway operates more than 1,000 trains a day on one of the largest freight rail transportation networks in North America.

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