Railroads look at liquefied natural gas to power locomotives

01/25/2014 12:00 AM

01/24/2014 2:21 PM

The diesel-burning locomotive, the workhorse of American railroads since World War II, will soon begin burning natural gas — a potentially historic shift that could cut fuel costs, reduce pollution and strengthen the advantage railroads hold over trucks in long-haul shipping.

Rail companies want to take advantage of booming natural gas production that has cut prices by up to 50 percent. So they are preparing to experiment with redesigned engines capable of burning both diesel and liquefied natural gas.

Natural gas “may revolutionize the industry much like the transition from steam to diesel,” said Jessica Taylor, a spokeswoman for General Electric’s locomotive division, one of several companies that will test natural gas equipment this year.

Any changes are sure to be slow. A full-scale shift to natural gas would require expensive new infrastructure across the nation’s 140,000-mile freight rail system, including scores of fueling stations.

The change is possible because of hydraulic fracturing techniques, which have allowed drillers to tap vast deposits of natural gas in fields including the Barnett Shale in North Texas.

The boom has created such abundance that prices dropped to an average of $3.73 per million British thermal units last year — less than one-third of their 2008 peak. (Severe cold weather across much of the country has pushed up prices this month, however, with futures rising above $5 on Friday for the first time since 2010.)

Over the past couple of years, low-price gas has inspired utilities to turn away from coal, a move that hurt railroads’ profits. And natural gas is becoming more widely used in transportation. More than 100,000 buses, trucks and other vehicles run on it, although that figure represents only about 3 percent of the transportation sector.

The savings could be considerable. Fort Worth-based BNSF Railway spent $4.5 billion on fuel in 2012.

But even in the most optimistic scenario, there’s no way all that diesel will be replaced. Railroads and locomotive makers are looking primarily at ways to retrofit machines to burn a mix of diesel and natural gas because that will be the quickest and easiest way to adopt the technology.

Locomotive makers have not set prices for retrofit kits, but railroads expect them to be cheaper than a new locomotive, costing roughly $2 million.

Using diesel in concert with natural gas offers advantages over using gas alone. Diesel can provide the spark needed to ignite natural gas without redesigning engines, and it helps provide horsepower.

Railroads plan to use liquefied natural gas, which is not as readily available as other forms of gas because it must be cooled to minus 260 degrees. That step adds to the price, but the amount varies based on the process.

Matthew Rose, who is executive chairman of BNSF Railway and was CEO until Jan. 1, said in March that the Fort Worth-based railroad would test LNG-powered locomotives and hoped to decide about the technology this year.

“The use of liquefied natural gas as an alternative fuel is a potential transformational change for our railroad and for our industry,” Rose said in making the announcement at the annual IHS CERAWeek energy conference in Houston.

Projected cost comparisons do not include the millions of dollars that railroads would have to spend on a network of natural gas fueling stations along their tracks. That expense won’t be clear until after the tests, when railroads decide whether to build their own liquefaction facilities or just store fuels.

“There are a lot of factors that aren’t accounted for yet,” said Michael Iden, who oversees locomotive engineering at Union Pacific.

Locomotive makers say natural gas engines could also significantly reduce emissions compared with diesel locomotives, but the potential cost savings is the biggest reason the industry is eager to make the change.

From the outside, natural gas locomotives will not look much different. But they will have to pull a tank car to have enough liquefied natural gas to give them a range similar to diesel units.

Both major locomotive manufacturers, General Electric and Caterpillar’s Electro-Motive Diesel, have developed prototypes to be tested by Union Pacific, CSX, BNSF and Canadian National.

If the projected savings are realized, railroads would improve their profits and better compete with trucks, against which they already hold the advantage on deliveries longer than 500 miles.

“They can lower their costs further and widen their advantage over trucks,” Edward Jones analyst Logan Purk said. But he sounded a note of caution: Natural gas prices have always been volatile, and they could climb if gas exports expand significantly and more industries switch to natural gas.

Another issue is the design of the tender cars that will haul liquefied natural gas for the locomotives. It must be standardized because the major freight railroads regularly pass locomotives back and forth to keep trains moving efficiently.

Once they agree on a design for the tenders, the railroads may have a hard time getting enough of them because tank car manufacturers are already struggling to meet demand. Customers sometimes wait up to three years for new tankers.

This isn’t the first time railroads have flirted with natural gas locomotives. Union Pacific and BNSF worked on the concept in the late 1980s and 1990s, so the industry isn’t starting from scratch.

Industry officials say the rise in natural gas prices that helped scuttle their earlier experimentation should not pose a problem this time because significant new sources are available.

Peter Roosen is CEO of VeRail, which is developing natural gas conversion kits for low-horsepower locomotives, such as those used in rail yards.

“I think we’re going to have reasonably priced natural gas for decades,” Roosen said, “if not for a generation or two.”

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