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Shale output spurs demand for tank cars

Keywords: Tags  railroads, Union Pacific, Ken Norwood, shale, oil, crude, tank cars, Jack Biegalski ArcelorMittal USA

SEAL BEACH, Calif. — Shale plays are making the West a "very hot market" for both the railroads and the tank cars that transport output from energy-rich regions, one railroad executive said.

Shale-based crude oil production is likely to continue to exceed pipeline capacity, Ken Norwood, director of business development for Union Pacific Railroad Co., said at an Association of Women in the Metals Industries meeting late last week.

"Try to get a tank car today—it’s impossible," said Norwood, whose company transports oil for customers in North Dakota’s Bakken Shale and other regions. He said a customer recently couldn’t find a single available tank car to move chemicals from Houston to the San Francisco area.

Shale-based energy’s impact on the steel industry—not just on tubulars—has been on the radar for some time. Jack P. Biegalski, director of plates and product control for ArcelorMittal USA LLC, Chicago, said during the Association of Steel Distributors’ 2013 Annual Convention in March that the Marcellus Shale energy play in Pennsylvania and adjacent states represented a "huge boom" for the steel business, with "a lot of (petroleum) product" moving by rail car (, March 25).

At the time, Biegalski noted the Obama Administration’s delayed approval of TransCanada Corp.’s proposed Keystone XL pipeline, which boosted companies’ need to find alternative methods of moving oil, including by rail car.

In other news, Norwood said Omaha, Neb.-based Union Pacific, which currently has about 12,000 gondola cars, will add about 200 units, mostly transverse trough rail cars, to its fleet this year. He called transverse cars—which are designed to ease loading of metal coils while eliminating much of the need for blocking and bracing, as well as reduce damage associated with coil telescoping—the "cars of the future" for hauling coils. Union Pacific has roughly 2,000 transverse cars in its fleet, he said.

At the same time, the company is watching the ongoing Panama Canal expansion and its possible impact on transport in the region, Norwood said. The expansion will accommodate higher-capacity ships, including post-Panamax vessels, which can carry 13,000 to 14,000 20-foot equivalent unit (TEU) containers, up from the current Panamax vessels, which can only carry 4,400 TEUs. But Union Pacific says the project won’t hurt the current levels of intermodal container traffic through the West Coast.

"We really don’t see a huge impact," he said, pointing out that shipment times will remain shorter via sea-rail transit. For example, intermodal shipments from Shanghai through Seattle to the New York/New Jersey metropolitan area take 20 days vs. 28 days via Panama Canal, he said.

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