Warren Buffett’s Railroad Tests Natural Gas to Drive Its Locomotives

By:  Bob Adelmann
09/10/2013
       
Warren Buffett’s Railroad Tests Natural Gas to Drive Its Locomotives

BNSF Railway's use of liquefied natural gas to power its locomotives is one small indication of the huge energy revolution, thanks to fracking. 

The quiet revolution going on in the energy sector as a result of fracking is being punctuated by changes unseen and unappreciated, such as the recent announcement by Warren Buffett’s railroad, BNSF Railway. The largest railroad in the country, BNSF is testing the use of liquefied natural gas (LNG) to drive the company’s locomotives, which currently use more diesel fuel than any other entity except the U.S. Navy.

In the announcement, BNSF chairman Matthew Rose called the change “transformational:”

The use of liquefied natural gas as an alternative fuel is a potential transformational change for our railroad and for our industry.

This pilot project is an important first step … [in] potentially reducing fuel costs and greenhouse gas emissions.

As the price of natural gas has fallen compared to the price of oil, the economic math is increasingly persuasive. At the current price for one million BTUs of natural gas, it would cost companies such as BNSF less than $20 for the energy equivalent in a barrel of oil costing $110. The explosion in natural gas in the United States has reduced the “landed price” of natural gas to one quarter of its price in the U.K., and one fifth of its cost elsewhere in the world. In the real world where BNSF operates, diesel fuel costs the company nearly $4 per gallon compared to just over $2 per gallon for large LNG users — a potential savings of 50 percent.

This is driving the BNSF test, according to Rose: "The changed market for natural gas in the United States is a critical part of our decision to explore it as a locomotive fuel."

BNSF isn't the first energy-dependent company to do the math, either. Waste Management (WM) has already started converting its fleet of 18,000 diesel trucks to LNG and expects to have the change-over completed soon. Said WM’s CEO David Steiner:

This conversion makes good business sense for our company and our shareholders because of the significant maintenance and diesel fuel cost savings. It’s much cleaner for the environment and our LNG trucks are much quieter.

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