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 last two weeks, train industry executives and others have been talking more about natural gas, as meetings in Houston and Chicago highlighted interest in a fuel that could slash one of railways’ top costs.
Representatives from major rail 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 railroads would really like to be able to use natural gas in their locomotives. It’s a cost issue,” said Doug Longman, a researcher at the Argonne National Laboratory near Chicago who has worked on various diesel engine projects over 30 years.
Rising diesel prices pushed Union Pacific Railroad’s 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 – up from 13 percent in 2001.
Diesel’s price has led railroads to invest in software and engine upgrades that can shave 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.
Pennies add up fast
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 BNSF Railway each consuming 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 switch to natural gas, railroads would have to modify diesel-electric locomotives at a cost today of $600,000 to $1 million each, 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 engine manufacturer Westport have announced plans to develop natural gas-powered engines for locomotives, although they haven’t announced timetables.
“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 challenge of moving and storing liquefied natural gas so that trains can refuel along the tens of thousands of miles of railroad.
And that presents an obstacle that was central to the recent private gathering of train people during the High Horsepower Summit at the Royal Sonesta Hotel Houston: How to get government approval for putting a tank of liquefied natural gas on a rail car.
The idea is to reinvent a relic: 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 LNG.
Shell and Westport organized the meeting, James Burns, general manager of LNG for Shell’s Transport Americas division, said in an email.
Natural gas has intrigued train companies for decades as a possible alternative to diesel, but until recently costs have been too high or volatile to spur support and investment.
BNSF tested natural gas as a fuel for locomotives about 20 years ago. BNSF spokesman Steven Forsberg declined to comment about the test except to say in an email that “the same issues and questions are involved in the current evaluations.”
Other companies were also wary of expressing too much optimism.
“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,” spokeswoman Raquel Espinoza-Williams said in an email.
Many environmentalists have supported natural gas as a cleaner-burning bridge fuel toward renewable energy sources. Over the last 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 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.