Railroad Through N.H. Provides New Path For Shale Oil

SOURCE: By JIM HADDADIN - Foster's Daily

DOVER — With an oil boom unfolding in the Midwest, petroleum producers are exploring new paths to bring the product to market, including one that runs through the middle of downtown Dover.

An official at Pan Am Railways confirmed recently that two trains, each carrying thousands of gallons of crude, passed through southern New Hampshire within the last month on their way north to Canada.

And more are likely to follow.

The trains were loaded with petroleum harvested from the Bakken oil fields in North Dakota, which is in the midst of a shale oil boom. They were trial runs on what is shaping up to become a busy transportation route for Midwestern crude.

The West's oil shale deposits are believed to contain more than 1 trillion barrels of oil — four times the holdings of Saudi Arabia, according to government and industry estimates.

North Dakota is on pace to double its oil production by 2015 to more than 1 million barrels a day.

Within the last six years, North Dakota has risen from the nation's ninth-leading oil producing state to the nation's No. 2 producer, second only to Texas.

However, the industry has been constrained by limited capacity to transport the product to refineries in the east and on the Gulf Coast. Proposals to build new pipelines across the country have been met with controversy because of concerns about the potential environmental impact of an oil spill.

Some environmental groups are also opposed to the techniques used to extract oil from shale formations in North Dakota. Shale contains fossilized algae, an immature form of oil that never received enough heat or pressure to produce liquid crude. It must be heated above 500 degrees to release a petroleum-like liquid.

To date, six major oil pipeline projects have been proposed to help move crude out of the rich Bakken and Three Forks formations in western North Dakota. The projects include TransCanada Corp.'s Keystone XL project, a controversial Canada-to-Texas pipeline that would also carry up to 100,000 barrels of crude daily from North Dakota and Montana.

That project and others have been placed on hold while government officials review the proposals and weigh objections from environmental groups.

In the interim, rail is proving an appealing mode of transportation for the petroleum industry.

About one-quarter of North Dakota's daily oil production is now being shipped by rail, Justin Kringstad, director of the North Dakota Pipeline Authority, told The Associated Press recently.

Some is also moved by truck, due to the lack of pipeline capacity in the state.

One major destination for shale oil is the Irving Oil refinery in New Brunswick, Canada. To reach the refinery, which is more than 2,000 miles away, petroleum producers are tapping three major railroad paths, according to Kevin Burkholder, editor of Eastern Railroad News.

The southernmost route utilizes a rail line that cuts across the southeastern corner of New Hampshire. After departing from North Dakota, the trains head to Chicago, then on to Rotterdam Junction in New York. From there, the trains are handed off to Pan Am, which drives the locomotives across the Hudson River and through Massachusetts, entering New Hampshire via a bridge over the Merrimack River.

The route extends northeast through Newmarket, Dover and Rollinsford, following the path used by Amtrak's Downeaster commuter train.

The route is already used to ship a variety of petroleum products, but trains rarely carry shipments as large as the ones that began heading east in the last few weeks, according to Kit Morgan, administrator of rail and transit services for the New Hampshire Department of Transportation.

Last month, the Portland Press Herald reported a so-called "unit train" pulling 104 tank cars of crude from North Dakota made the inaugural journey through New Hampshire and Maine on its way to the oil refinery in New Brunswick. The train reached Maine during the weekend of May 25, according to the Press Herald.

Burkholder said he was tipped off about the trip by sources in the railroad industry, and managed to photograph the train as it crossed the border into New Hampshire.

The second large shipment to pass through the Granite State took place in the last two weeks, according to a Pan Am spokeswoman, who declined to divulge the exact date.

Burkholder said the second train was scheduled to pass through Dover between June 13-15, based on information he's received from insiders. Oil companies have been reticent to discuss the shipments, which they deem "very sensitive moves," Burkholder said.

Morgan didn't know about the 104-car crude shipment until he read the story published by the Portland Press Herald.

Neither did Rick Berry, a staffer in the state Department of Environmental Services who works in the division tasked with monitoring petroleum and hazardous waste.

"I saw the same article," Berry said. "Basically, that's all I know about it."

Berry said there is no requirement for railroads to report the cargo they move to state officials, since the federal railway administration controls rail policies.

New Hampshire law does impose reporting requirements for any oil spill that occurs in water, or any spill of more than 25 gallons on land, he said.

Burkholder said railroad shipments of Bakken crude have been ramping up since fall 2011. In addition to the path through New Hampshire, there are two other prominent routes being explored for crude shipments by rail, he said.

One travels through Winnipeg, Toronto and Montreal, and dips through a corner of Maine to reach the refinery in New Brunswick. The third route is located entirely in Canada, passing through Quebec on its way to the east coast.

To prepare for an influx of new tanker cars, Burkholder said, Irving is building new load-out tracks at its New Brunswick facility, hoping to be able to unload more train cars, and to do it faster.

"They can get oil from as many different routes as they can possibly get," he said.

Two representatives from Irving Oil did not return calls seeking comment.

Cynthia Scarano, executive vice president of Pan Am Railways, declined to discuss the routes used by trains laden with Bakken crude.

However, she confirmed two such trains have utilized the track in southeastern New Hampshire in the past three weeks.

For Pan Am, moving the crude doesn't require any special accommodations, Scarano said. In many respects, it's easier to transport than a train full of mixed freight cars, since a train dedicated to one type of cargo doesn't require handling along the way.

Scarano said the company sees the new Bakken crude shipments as a potentially lucrative development.

"We're looking for new business everywhere, but this is definitely promising," she said.