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Re: Frack sand traffic |
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Posted by steamdriven on Thu Dec 18 14:30:02 2014, in response to Frack sand traffic, posted by Dave on Thu Dec 18 14:11:04 2014. Maybe they don't want that traffic and have something higher margin on the rails in its place.Or they are now taxed/DOJ'd more and must recover costs. |
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Posted by Mark S. Feinman on Thu Dec 18 14:58:53 2014, in response to Frack sand traffic, posted by Dave on Thu Dec 18 14:11:04 2014. My guess is that BNSF is raising prices now in anticipation of oil prices going back up in the future. I mean, is there really any alternative?--mark |
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Re: Frack sand traffic |
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Posted by Dave on Thu Dec 18 15:40:02 2014, in response to Re: Frack sand traffic, posted by steamdriven on Thu Dec 18 14:30:02 2014. That was my thought too (higher margins elsewhere) but no, they are raising rates because they're trying to make up for declining business. |
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Posted by Dave on Thu Dec 18 15:41:11 2014, in response to Re: Frack sand traffic, posted by Mark S. Feinman on Thu Dec 18 14:58:53 2014. Perhaps but 28%? Way to piss off your customers! But when the traffic comes back will they cut rates? I doubt it. |
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Re: Frack sand traffic |
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Posted by SLRT on Thu Dec 18 15:53:48 2014, in response to Frack sand traffic, posted by Dave on Thu Dec 18 14:11:04 2014. I would say they're raising the price to try to support the cost of infrastructure and maintenance, and try to maintain profits.A railroad is not a grocery store. If there's no sand to haul, people aren't going to use the service more if the railroad lowers prices. If there is an alternative carrier that would charge less, BNSF might lose business. |
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Re: Frack sand traffic |
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Posted by Olog-hai on Thu Dec 18 16:06:41 2014, in response to Frack sand traffic, posted by Dave on Thu Dec 18 14:11:04 2014. It makes sense if you're Warren Buffett. |
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Posted by WillD on Thu Dec 18 17:53:33 2014, in response to Frack sand traffic, posted by Dave on Thu Dec 18 14:11:04 2014. Do we know what BNSF's rate changes were over the past year or two? Did they reduce rates last winter as increased oIL traffic and cold weather lead to poor service? If they're anticipating a reduction in oil traffic and a corresponding improvement in serice quality then a rate increase may be warranted. |
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Re: Frack sand traffic |
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Posted by Elkeeper on Thu Dec 18 17:58:46 2014, in response to Re: Frack sand traffic, posted by Dave on Thu Dec 18 15:40:02 2014. Must have taken their cue from the Post office! |
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Posted by JAzumah on Thu Dec 18 18:06:56 2014, in response to Frack sand traffic, posted by Dave on Thu Dec 18 14:11:04 2014. Nope, it is a good way to lose that business. |
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Re: Frack sand traffic |
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Posted by Spider-Pig on Thu Dec 18 18:11:46 2014, in response to Frack sand traffic, posted by Dave on Thu Dec 18 14:11:04 2014. ...ladies and gentlemen of this supposed discussion board, I have one final thing I want you to consider. Ladies and gentlemen, this is Chewbacca. Chewbacca is a Wookiee from the planet Kashyyyk. But Chewbacca lives on the planet Endor. Now think about it; that does not make sense! Why would a Wookiee, an 8-foot-tall Wookiee, want to live on Endor, with a bunch of 2-foot-tall Ewoks? That does not make sense! But more important, you have to ask yourself: What does this have to do with this thread? Nothing. Ladies and gentlemen, it has nothing to do with this thread! It does not make sense! Look at me. I'm a lawyer not defending a major record company, and I'm talkin' about Chewbacca! Does that make sense? Ladies and gentlemen, I am not making any sense! None of this makes sense! And so you have to remember, when you're in that jury room deliberatin' and conjugatin' the Emancipation Proclamation, does it make sense? No! Ladies and gentlemen of this supposed discussion board, it does not make sense! If Chewbacca lives on Endor, you must acquit! The defense rests. |
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Re: Frack sand traffic |
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Posted by NIMBYkiller on Thu Dec 18 22:36:28 2014, in response to Frack sand traffic, posted by Dave on Thu Dec 18 14:11:04 2014. Very different from your scenario. Production is down because of the lower demand, hence why "sales" for the railroad are down. Lower shipping price will do little or nothing to bring demand back up for the product since it won't make much of a dent in the overall price of the product. In your scenario, you are the one controlling the price to the end user, so you can make demand by lowering the price that the end user is paying. |
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Re: Frack sand traffic |
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Posted by Broadway Lion on Fri Dec 19 07:55:17 2014, in response to Frack sand traffic, posted by Dave on Thu Dec 18 14:11:04 2014. Haliburton is building a new Frack Sand terminal here in Richardton. It will have some tall sand towers, two loops of track 1 mi + each, and other facilities. They expect it to be in operation by this summer. BNSF is the only railroad that can carry frack sand to this area, because they are the ONLY railroad in this area. BNSF is putting in multi-billions of dollars in infrastructure improvements, so I suspect that the shippers will be happy to have the infrastructure, and frankly really do not worry about costs so much as having product to work with.Coal, Grain, Oil, Sand, pipe, chemicals all come in by rail, BNSF really does need to doubled track both of its ND mane lions, and that costs money. Shippers hereabouts know that products must ship, the have plenty of money, so no problem for them, as long as the price of oil remains high. If the price of oil goes too low the whole thing goes into hibernation until it comes back again. Money is not the limiting factor out here, capacity is. ROAR |
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Posted by Broadway Lion on Fri Dec 19 08:03:17 2014, in response to Re: Frack sand traffic, posted by JAzumah on Thu Dec 18 18:06:56 2014. They are not going to loose business. The money in this area is quite fantastic. Money is not the limiting factor out here, capacity is.BNSF is putting billions into infrastructure because they need it, shippers out here will pay any price to ship product. They MUST ship product. The demand for rail service is not going to go away as long as the price of oil remains high. At the moment the Sauidies are giving the stuff away in the hopes of colsing down the more expensive US rigs. Once upon a time DOW chemicals chief and only product was Boron. The only other source was a German company. Dow was quite a bit cheaper and the business began to shift to Dow. The Germans lowered their price, selling off stockpiles at a price that undercut Dow. Dow bought the German product, relabeled and sold it at a profit, The Saudies can only play that game so long before it bites them in the ass. ROAR |
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Re: Frack sand traffic |
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Posted by terRAPIN station on Fri Dec 19 08:36:07 2014, in response to Re: Frack sand traffic, posted by Broadway Lion on Fri Dec 19 08:03:17 2014. What kind of loose business do you run? |
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Posted by Spider-Pig on Fri Dec 19 09:13:18 2014, in response to Re: Frack sand traffic, posted by Broadway Lion on Fri Dec 19 08:03:17 2014. That worked because nobody doesn't like molten boron! |
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Posted by Dave on Fri Dec 19 09:15:39 2014, in response to Re: Frack sand traffic, posted by NIMBYkiller on Thu Dec 18 22:36:28 2014. Raise the shipping cost too high and in some markets it will be cheaper to ship by truck. Sand is offloaded into trucks at some point anyway so at some price point it becomes less expensive to ship it the entire transport that way. |
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Posted by AlM on Fri Dec 19 09:22:46 2014, in response to Re: Frack sand traffic, posted by Dave on Fri Dec 19 09:15:39 2014. I suspect a 28% increase still leaves it as way cheaper to transport by rail. Rail has a huge advantage for heavy materials. |
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Re: Frack sand traffic |
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Posted by Dave on Fri Dec 19 14:04:38 2014, in response to Re: Frack sand traffic, posted by AlM on Fri Dec 19 09:22:46 2014. True. |
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Posted by Mark S. Feinman on Fri Dec 19 14:32:05 2014, in response to Re: Frack sand traffic, posted by Dave on Thu Dec 18 15:41:11 2014. Cut rates? No way! The airlines are still charging fuel surcharges even though oil prices have tumbled recently.--Mark |
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Re: Frack sand traffic |
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Posted by WillD on Fri Dec 19 16:16:35 2014, in response to Re: Frack sand traffic, posted by JAzumah on Thu Dec 18 18:06:56 2014. That may be the point. Their transcontinental intermodal business may be the primary money maker for them (I'm not sure if it is), but frack sand and oil trains are gumming up the works in the middle of the routes used by priority intermodal routes. Dave's OP seems to make the case that the increase in rates is solely on frack sand traffic, so that may be a way to reduce the traffic, or at least ameliorate the financial impact of the delays those trains create for more profitable intermodal traffic. |
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Re: Frack sand traffic |
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Posted by Broadway Lion on Fri Dec 19 16:40:30 2014, in response to Re: Frack sand traffic, posted by WillD on Fri Dec 19 16:16:35 2014. It will NOT reduce the traffic so long as we use oil. It will allow for major infrastructure upgrades that the additional traffic requires.Besides, MONEY is not the limiting factor in the oil business, Rail Capacity is. ROAR |
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Re: Frack sand traffic |
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Posted by WillD on Fri Dec 19 16:56:39 2014, in response to Re: Frack sand traffic, posted by Broadway Lion on Fri Dec 19 16:40:30 2014. It will NOT reduce the traffic so long as we use oil.We may not be using North Dakota's oil for much longer if the Saudis have their way. This way BNSF reduces congestion of lower margin sand and oil shipments, and as you say, funds infrastructure improvements. Besides, MONEY is not the limiting factor in the oil business, Rail Capacity is. No, it's money. Shale oil is fairly high cost, both at the wellhead and for the refiner. If the Saudis drive the price of oil below the cost to produce Bakken shale oil, then those wells will close down, or at least we'll see a reduction in the drilling of new wells. North Dakota's bubble will burst, and BNSF's freight between Seattle and Chicago will go back to being the primary rail user in the area. |
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Re: Frack sand traffic |
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Posted by WillD on Fri Dec 19 17:09:57 2014, in response to Re: Frack sand traffic, posted by Broadway Lion on Fri Dec 19 08:03:17 2014. The money in this area is quite fantastic.Yes, that's called a bubble economy. The fact that you can't recognize it might cause one to question all the other many and varied pronouncements on economics you've made over the years. The ends of bubble economies tend to go pretty poorly for those participating in the bubble. North Dakota may have a very long, cold winter ahead of it. BNSF is putting billions into infrastructure because they need it, shippers out here will pay any price to ship product. Those shippers are now making around half as much on every barrel of oil they produce as they were just 3 months ago. They do not have the margin to pay through the nose for shipping costs and it's a fantasy to insist the bubble economy will go on forever when everything points to the Saudis succeeding in their attempt to drive shale oil from the field. The demand for rail service is not going to go away as long as the price of oil remains high But it's not high. The Brent price has fallen to $60/bbl from nearly $100/bbl in October. That's a veritable freefall. Anyone whose bubble economy depends on oil being up around $100/bbl for their high cost production methods to keep the economy going is going to have a bad time. The only other source was a German company. Dow was quite a bit cheaper and the business began to shift to Dow. The Germans lowered their price, selling off stockpiles at a price that undercut Dow. Dow bought the German product, relabeled and sold it at a profit, The Saudies [sic] can only play that game so long before it bites them in the ass. And the boron was still coming from Germany. Anyone in the US producing boron was out of luck as their customer bought from abroad. If you're attempting to make an analogy to the Saudis and Bakken oil producers then that analogy does not end well for the North Dakotans. |
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Posted by AlM on Fri Dec 19 17:25:06 2014, in response to Re: Frack sand traffic, posted by WillD on Fri Dec 19 17:09:57 2014. ND is an unusual bubble, however. The assets are still there. Next time the price goes up the drill rigs come back. And the price will go up. We just don't know when. |
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Posted by Broadway Lion on Fri Dec 19 17:58:26 2014, in response to Re: Frack sand traffic, posted by WillD on Fri Dec 19 16:56:39 2014. That stuff runs on the old GN line, down here on the old NP, Coal is King.We will buy the Saudi oil, and repackage it as our oil, and then make a profit on it. The Saudi's can play games, but only for so long. We need oil, and we need oil independence. I'd put a heavy tax on foreign oil and encourage local development. In case you had not noticed, we need jobs here more than we need oil from over there. ROAR |
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Posted by AlM on Fri Dec 19 18:12:45 2014, in response to Re: Frack sand traffic, posted by Broadway Lion on Fri Dec 19 17:58:26 2014. I'd put a heavy tax on foreign oil and encourage local development.That's a highly left wing position, you know. :) |
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Posted by WillD on Fri Dec 19 20:10:24 2014, in response to Re: Frack sand traffic, posted by AlM on Fri Dec 19 17:25:06 2014. How is that different from the oil busts that crushed Houston's economy at various times in the past 2 decades? The oil was still in the ground, but there was no lending available to fund the same sort of extraction effort. I think your optimism is not warranted in view of past oil busts. Lenders will lose their shirts on this bust, and they're not going to be willing to lend quite so much money to a capital intensive drilling effort as they are now, even if oil prices recover. |
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Posted by AlM on Fri Dec 19 20:14:29 2014, in response to Re: Frack sand traffic, posted by WillD on Fri Dec 19 20:10:24 2014. Houston is a real city. Williston isn't.Of course there will be repercussions; they just won't be so huge. |
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Posted by WillD on Fri Dec 19 21:53:43 2014, in response to Re: Frack sand traffic, posted by Broadway Lion on Fri Dec 19 17:58:26 2014. They may be on separate lines in ND, but consolidation after the BN merger makes for congestion around cities, where expanding capacity is most expensive. That is where BNSF encountered the most difficulties last year. BNSF clearly stated that the delays to intermodal, auto, and passenger traffic last winter were attributable to increased oil traffic, including frack sand, so I'm not sure why you don't believe them.I'm also not sure what it is you do not understand about basic economics. How is it you think any American company will be able to sell oil at a rate above the world price? We don't have your left wing oil tariff, nor are we likely to enact one. We also do not have your communist command economy, so we can't declare the value of goods independently of the market value. So how exactly are we going to import oil and profit on it? And since when do we need jobs in North Dakota? We need lower energy prices more than we need jobs where nobody lives. Lower energy prices will do more to improve the economies of places that actually have people living in them and create jobs where people live. |
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Posted by Broadway Lion on Sat Dec 20 07:32:49 2014, in response to Re: Frack sand traffic, posted by AlM on Fri Dec 19 18:12:45 2014. Yeah, I know. I'm not sure what I think about it.But, while Bakken oil was impossible and too expensive to extract 50 years ago, technology has shifted greatly. With horizontal drilling one rig does the work of 10. Tha pipe goes almost two miles straight down, and then it shoots out horizontally for another mile or maybe two, so the catchment area for one rig is very large. It is also why fracking works so well out here : you are working miles below the water table. Drilling up here is not as labor intensive as you would imagine. I have no clue as to what the real break even point is on the barrel price, but most of the labor is in the transport sector of the project. The numbers of trucks on the roads is measured in the thousands. And those people get good pay. So does everybody in the support sectors, retail, construction, housing etc. The bubble is driven by oil, but the growth is much bigger than oil alone. ROAR |
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Posted by Broadway Lion on Sat Dec 20 07:42:14 2014, in response to Re: Frack sand traffic, posted by WillD on Fri Dec 19 21:53:43 2014. I do believe all of this, and yes oil affects traffic on both lines, but the southern line does not see any inter-modal in any event. BNSF runs its faster trains on the GN track, its slower trains on the NP track. Now with so much oil on the GN, that will slow that line down too.Cheap energy must come from somewhere, and that somewhere happens to be North Dakota. In addition to oil, we also have wind. We have some of the largest wind farms in the country, and are building more wind towers at as fast a rate as we can. The limiting factor there again is transportation, or in this case distribution. The national power grid does not make much of an appearance in North Dakota, so it is difficult to transmit power out of state. That too is changing. But again the limiting factor is not money. Some farmers simply do not want their cows standing ear the transmission lines. Maybe they are afraid that they will glow in the dark. If we need lower energy prices, why is Obama against every form of energy. He ran on an anti-coal and anti-oil platform, he still disallows exploration in federally controlled areas. He is against pipelines, and he has stated over and over that the price of fuels needed to go up. Cheep energy, like cheep fuels comes at a price. North Dakota can provide fuels and food if you have the money to buy them from us. ROAR |
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Posted by JAzumah on Sat Dec 20 11:32:03 2014, in response to Re: Frack sand traffic, posted by Broadway Lion on Sat Dec 20 07:42:14 2014. The breakeven for Bakken is $77. The funding for many of these companies to ramp up may be tied to the oil price. At some point, funders may cut them off and they may have to scale back involuntarily. The rate increase would be another straw on the camel's back. We are below $60 right now and the bottom is expected at $40. |
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Posted by Dave on Sat Dec 20 12:01:09 2014, in response to Re: Frack sand traffic, posted by WillD on Fri Dec 19 20:10:24 2014. Lenders aren't nearly as extended this time and cities like Midland have been preparing for the end of the oil boom for some time now so they're better positioned. Sure, lots of oil patch people will lose their jobs and those businesses serving oil workers will suffer but the cities and lenders shouldn't get hit as hard this time around. |
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Posted by Dave on Sat Dec 20 12:08:24 2014, in response to Re: Frack sand traffic, posted by JAzumah on Sat Dec 20 11:32:03 2014. It's not calculated that way. What's measured is Barrels per Day (BPD) and the cost to drill the well and extract the oil.A typical well cost about $10 million to drill. Over time a lot of oil is extracted in the early years and this rate declines over time. Typical initial production rate on a newly drilled Bakken well is 580 BPD but some wells are much higher. With a discount rate of 15%, the median well has a profitability index of 1.02 (after federal income tax) if $66 per barrel is used. (A profitability index of 1.0 indicates a break even situation at the discount rate that was used in the model). This means that at $66 per barrel, half the wells are uneconomic. If oil prices settle out at this price it can be expected that the number of wells drilled should be reduced by about half. If the current oil price of $55 per barrel is used, the initial production rate has to be increased to 800 BPD in order to break even. According to the J.D. Hughes data, 25% of the wells have an initial production rate of 1000 BPD or more. Accordingly, if oil prices settle out at the current price, the number of wells drilled will be about a quarter of the present number. |
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Re: Frack sand traffic |
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Posted by WillD on Sun Dec 21 02:26:30 2014, in response to Re: Frack sand traffic, posted by Broadway Lion on Sat Dec 20 07:42:14 2014. yes oil affects traffic on both lines, but the southern line does not see any inter-modal in any event. BNSF runs its faster trains on the GN track, its slower trains on the NP track.Swing and a miss. Now with so much oil on the GN, that will slow that line down too. Except oil traffic will decline. Cheap energy must come from somewhere, and that somewhere happens to be North Dakota. Except bakken crude is not cheap. In addition to oil, we also have wind. Which can't be transmitted anywhere useful. We have some of the largest wind farms in the country, Which are noteworthy for achieving a utilization at nameplate capacity of just 5%. That's low even for wind power. That too is changing. But again the limiting factor is not money. No, it's money. 500kV lines cost money. Unless you guys are running to the Feds to fund those needs as well. If we need lower energy prices, why is Obama against every form of energy. And as we see now cheap energy does not come from the wellhead. You're barking up the wrong tree. He ran on an anti-coal Why would anyone be pro-coal? and anti-oil platform Which was validated by the Deepwater Horizon disaster. he still disallows exploration in federally controlled areas. Because again, cheap energy does not come from drilling. We can see that now with the Bakken crude. He is against pipelines, Sure, because you want to make it easier to get Canadian oil off the continent to China and ensure that whatever savings in transportation we get evaporates. he has stated over and over that the price of fuels needed to go up. The price of the fuel shouldn't reflect the severe environmental damage created in getting that fuel? Cheep energy, like cheep fuels comes at a price. Huh? There are words there, but they make absolutely no sense. North Dakota can provide fuels and food if you have the money to buy them from us. That's definitely not true. Otherwise the Saudis wouldn't be pushing our shale oil sector out of the market. |
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