The rising ability to produce oil out of the Bakken Shale in North Dakota and the Permian Basin in Texas has brought new challenges to the oil pipeline business.
Keystone XL, the delayed pipeline from the Dakotas to the Texas refining complex may become obsolete before it sees another review post Obama Administration.
A proposed pipeline from the Permian to the southern California refineries was soundly rejected by the oil companies, instead preferring the flexibility that rail oil delivery provides. This was also driven by California's existing "heavy Alaska crude" capabilities, as Texas oil is not. Canadian oil by rail is.
While the pipeline industry retorts that pipelines are safer than rail, actual statistics show that oil spillage (gallons per mile traveled) due to rail has been significantly less than pipelines over the past 15 years. With new standards on oil railcars (double walls, crash standards and 3 million mile lifespans) there is anticipation that rail actually provides a more environmentally sounder approach to oil delivery.
Oil delivery by rail is marginally more expensive, but it moves at an average speed of 25mph, whereas pipeline oil moves at 2-3mph. A pipeline is fixed, so the pricing is based on long term contracts, bringing product from one location to another. Rail is ultimately flexible, taking oil across the US/Canada rail network to any location it is needed. The market has responded as there are now 72 oil loading terminals in North Dakota, whereas 10 years ago, there were none.
The oil companies agree, the backlog to order the next generation oil rail car is now at 30 months. Oil car capacity has doubled in just 15 months. For years people watched unit coal train rumble across the country with Powder River coal, now people are starting to see unit oil trains moving across the landscape.
US Railroads, with years of "just in time" delivery experience with coal and auto parts, was prepared for the expectations of the oil delivery market.
People on the US East Coast were amazed when North Sea Brent oil (which is declining and getting expensive) was quickly replaced by unit trains of cheaper heavy Canadian oil. Clearly the reduced dependence on pipelines to route oil has produced new opportunities in rail transportation.
http://www.cnbc.com/id/100831924 (http://www.cnbc.com/id/100831924)
http://www.usnews.com/opinion/blogs/economic-intelligence/2013/06/12/disinterest-cancels-kinder-morgan-pipeline-from-texas-to-california (http://www.usnews.com/opinion/blogs/economic-intelligence/2013/06/12/disinterest-cancels-kinder-morgan-pipeline-from-texas-to-california)
(http://peoriastation.blogpeoria.com/files/2010/06/BNSF061910Q-Copy.JPG)