Dan Reed

With Liquified Natural Gas, Perhaps The Little Engine Actually Could

“I think I can. I think I can. I think I can.”

If you’ve ever been a child, raised one, or spoiled one who happened to be your grandchild, you’re probably familiar with that courageously determined phrase from the classic children’s book The Little Engine that Could. And soon you could be hearing it from real trains – that is, if real trains could talk like the anthropomorphically-animated lead character in the book.

The rail industry is getting serious about using natural gas to power their massive locomotives. Soon BNSF, the nation’s second-largest railway, will begin testing several locomotives refitted to run on Liquefied Natural Gas, or LNG instead of conventional diesel fuel. And if the results of those tests are as positive as they’re expected to be, you should give serious consideration to buying lots of stock in the natural gas companies. BNSF officials have made it clear that they intend to begin a 20-year locomotive replacement-and-growth program if the test results are as positive as they hope they will be. And if BNSF, a company owned and robustly touted by Warren Buffet’s Berkshire Hathaway, takes the deep dive into LNG-fueled locomotives, you can bet the farm that the rest of the industry will follow.

A Big Boost for Natural Gas

The railroads in this country run more than 20,000 big locomotives. And nearly all of them would be in line to be replaced by LNG burners, or updated to run on either diesel or LNG, depending on what’s available at any given location, or even on a blend of diesel and LNG. That almost certainly would give a great boost to the slow-paced growth of natural gas as a fuel in other forms of transportation like commercial trucking and industrial machinery. Longer term, it could even be a factor in driving increased use of natural gas as fuel for automobiles, though the biggest impediment to that likely will remain the lack of a truly ubiquitous national public refueling network.

The rail industry is being driven toward natural gas by the yawning gap between the price of diesel and the current price of natural gas. The cost of a gallon of diesel fuel is now over $4. LNG, meanwhile, costs only about 50 cents a gallon. Saving 85 percent to 90 percent on the cost of fuel is an extraordinarily tantalizing prospect for companies like Union Pacific, BNSF, CSX and smaller, so-called “short line” railroads. Why? Because nearly a third of the $58 billion they spend on operations each year goes for diesel.

In theory that means goods shipped by rail – and bought by retail consumers – should go down in price over time. The railroads naturally will try to keep their rates at current levels even as their fuel costs go down with the switch to LNG. We might even get lucky as competitive pressures mount and force them to lower their rates, at least a bit. More realistically however, lower fuel costs as a result of the switch to LNG likely will mean railroads simply won’t be raising their rates for a good long while. For consumers, that should result, at a minimum, in price stability for goods shipped by rail.

Sweet Serendipity: It Will Be Good for Air Quality

The serendipity in such a change, if it actually comes about, is that while the railroads would be switching to LNG to save some bucks – billions, in fact – the switch also would be environmentally beneficial. That’s not to imply that LNG-fueled locomotives will be “green” in the strictest sense. They won’t be. They’ll still emit carbon gases, including both Carbon Dioxide and unburned Methane. In fact, they’ll likely emit more carbons than conventional diesel engines.

But they’ll also emit a lot fewer nitrous oxides (NOx), a major component of both smog and acid rain. NOx is such a big concern that the Environmental Protection Agency’s emission reduction rules actually allow newly designed industrial engines like those in locomotives to emit more carbons than older model engines so long as they drastically reduce NOx emissions.

To be sure, switching the nation’s 20,000-plus locomotives to LNG from diesel won’t happen overnight (if it happens at all). And it certainly won’t be cheap. A big locomotive designed to operate in multi-locomotive chains powerful enough to pull mile-long trains weighted down with coal, or steel, or cars, or other heavy products costs about $2 million. So merely replacing all 20,000 of today’s diesel-burning locomotives with identical diesel locomotives would cost at least $40 billion (a price tag that would have to be spread out over at least 20 years for the railroads to swallow it). But doing it with LNG-only or LNG-diesel dual fuel engines would cost about 50 percent more than that, or around $60 billion.

Why the Additional Cost?

That’s because running a locomotive on LNG or an LNG-diesel mix would require not only significant mechanical changes to the engines themselves but also the construction “thermos bottle”-style double-walled fuel cars. Such fuel cars, similar to coal tenders that were attached to steam-powered locomotives before the switch to electric-diesel engines a hundred years ago, would be necessary to safely carry the heavy and extraordinarily cold (-270 degrees) LNG  fuel. The fuel cars also would have to carry the heating and conversion equipment required to bring LNG back from its super-cooled liquid state to the warmer, gaseous state it must be in before it can be injected into an engine.

Still, such big spending could be worth it, given both the enormity of the price gap between diesel and natural gas and the recently recognized abundance of natural gas. The railroads toyed with switching to natural gas 25 to 30 years ago, but that idea was shelved by rising natural gas prices at a time and the mistaken belief that our natural gas supplies would play out in a few decades. Now, however, new drilling techniques and global petroleum economics are making the exploration for, and the production of unconventional gas a big winner in the marketplace.

As a result, we soon could be “hearing” locomotives chugging along saying “I think I can. I think I can. I think I can … run really well and economically on natural gas.”

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