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By David Foster, Executive Director, RAIL SolutionVolumes have been written about the transition of railroads from steam to diesel and the pivotal importance this played in their survival. Though the migration to diesel brought enormous economic savings and operating benefits, the industry is now on the cusp of an important transition away from diesel, with equally grand potential and weighty consequences. Diesel fuel options being increasingly explored are liquefied natural gas (LNG) and electrification. Although the switch from steam to diesel generally resulted in less supporting infrastructure, either LNG or electrification would need vast new capital investment.LNG requires extensive locomotive modifications, development of tender cars for LNG transport, new LNG storage, transport and servicing facilities, and raises unavoidable issues of safety regarding the handling and use of a high-pressure cryogenic liquid. Electrification also involves huge, up-front outlays, mostly for catenary, but also for electric, or dual-mode, locomotives. One advantage, however, is the mature technology. Electrification is commonplace worldwide, except in America, so the equipment and best practices are known, proven and available. Which option the rail industry selects will have a huge, long-term impact, perhaps even longer-lived and more important than the historic switch from steam to diesel. Gas seems to be in the leadCurrently, gas seems to have the lead. There has been no large electrification initiative since Amtrak strung wires between New Haven and Boston 15 years ago. Yet we have read about, and seen pictures of, several Class I railroads experimenting with LNG as a diesel fuel alternative. From a price standpoint, this makes current sense. Natural gas is cheap, typically over the last year or so in the 4 cent to 4.5 cent per million Btu range, down from 13 cents to 15 cents/mmBtu only a decade earlier. As of this writing, the price is hovering barely above 3 cents/mmBtu. This is a result of using new technologies such as hydraulic fracturing and horizontal drilling, liberating vast gas deposits from shale rock formations. Diesel fuel prices have also fallen as these technologies have led to new economically recoverable oil deposits, but not as much as natural gas prices have. The key difference here is the size of the developed market. New gas in the quantities suddenly available is difficult to sell into existing markets.Oil is different. Again, there has been a sudden increase in domestic output. But the market for petroleum is huge, with the U.S. importing enormous quantities each year, more than any other nation. So the effect of new domestic production is largely to displace imported oil barrel for barrel. The sudden December swoon in oil prices was a welcome year-end stimulus that increased consumers’ disposable income and injected liquidity into domestic markets. But it is unlikely to be sustained sufficiently to snuff out rail industry interest in diesel alternatives.Gas producers have a problem. New markets need to be developed as fast as possible. They are working hard on this. Industries that had moved operations out of the U.S. because of high energy costs, such as chemicals, fertilizer and metal production, are being lured back. Dozens of proposals have been advanced for government approval to export U.S. LNG overseas.Electric utilities have switched major plants from coal-fired generation to gas. And gas lobbyists have pushed for federal legislation to subsidize new natural gas engines and refueling stations for large trucks.No one can predict how soon or how much such efforts will increase the currently low natural gas prices. But the likelihood is they will. Also, some observers have logically suggested that gas producers opening up new fields with fracking are developing the cheapest, most accessible gas first so future costs may rise. Environmental regulations remain a wild card that could also increase producers’ costs and affect long-term pricing.Now, back to the Class I railroads in North America working on alternatives to diesel dependency. Gas is cheap and abundant. Hard pressed gas companies would likely make sweetheart deals to open up new markets with the rail industry. But the big risk is the long roll-out time to deploy replacement gas technology. While railroads’ analytical models may make sense with gas at 4 cents/mmBtu, suppose it has rebounded to 13 cents, or higher, by the time the billions of dollars in new infrastructure to support LNG are in place? Having committed to gas could then, in retrospect, seem very ill-timed and hard to undo.As for electrification ...What about electrification, then? Is that any better or less risky? Are there advantages over committing long-term to gas?The electric power industry has been characterized in recent years by lack of growth. Conservation campaigns, increased use of renewables, and slack industrial growth through the economic downturn have all damped demand at power plants. Power companies, like the gas producers, can be expected to be aggressive in wooing the North American railroad industry as a major new customer.Electric companies and railroads were natural allies as much as a century ago. Streetcar lines and interurbans were major users of electricity. So important were they as customers that often the electric companies took ownership in such rail operations.While today’s power companies seem unlikely to invest in railroads, they may be willing to participate in up-front capital costs of installing catenary. Power and demand imbalances afflict the grid. For example, there may be over-abundant wind power in remote West Texas, and unmet needs in densely populated California. Attractive synergy could result from deals with railroads using their rights of way for power transmission, while selling power at the wire to the railroad along the route. In the example above, it’s not hard to imagine the busy Union Pacific mainline between El Paso and Los Angeles being electrified and also serving as a key electric transmission corridor.Locomotives are a critical part of the analysis. Electric locomotives have several identifiable advantages over diesel. They accelerate and decelerate faster. Dynamic breaking energy can be reused instead of being dissipated as waste heat. Because horsepower is not limited to the on-board engine and generator sets, locomotives can be more powerful, the importance of which is magnified at higher speeds. All of these factors mean that railroads would need fewer electrics to replace their diesel fleet.Because electric locomotives have no engines or generators, they should be cheaper to buy and maintain. Reduced complexity may equate to higher reliability and availability over time. Technology is mature, and electric locomotives, with a wide range of features, are available from builders both domestically and internationally.Natural gas locomotives have been tested, and even though some prototypes have entered operation, they nevertheless still need to be considered experimental. If a Class I carrier were to decide to place an order for, say, 50 of them, they would be very expensive because they would basically have to be custom built and the population of likely builders would be much smaller than for electric units.Furthermore the natural gas locomotives built and tested so far are dual-mode engines that retain diesel operating capability alongside LNG. While in the future a true gas-only locomotive may be feasible, currently it seems some amount of diesel oil is still required to lubricate the engine’s cylinders and facilitate combustion. So these units are very complex, retaining all the inherent intricacies and maintenance demands of the diesel supplemented by the natural gas components and handling equipment.Three other elements of LNG-powered locomotives may be worth noting here. First, engineering studies have shown that natural gas is not as good a fuel for direct combustion in an engine as diesel oil because there is less inherent energy per unit volume (Btu/pound). This can mean an effective de-rating of horsepower output of an engine burning natural gas versus diesel oil. Second there is a significant cost to prepare and store LNG. Compressing pipeline gas to create LNG requires a large energy component. Additional energy would be needed to keep the LNG super-cold during transportation and storage. Such preparation and refrigeration costs are offsets to the energy and fuel cost savings railroads could expect from switching away from diesel oil. Some technical analysts have gone so far as to claim that the electricity used to create and store LNG would, alone, be enough to power the trains!And third, there is the lurking safety question. Photos of test locomotives show two diesels sandwiching an LNG tender that can fuel both of them. This means that the operating crew is always close to the high-pressure, volatile LNG. Normal railroad operating rules require hazardous materials cannot be placed in the train adjacent to the locomotive. Rail industry operating unions might well object to working in such proximity to an LNG fuel tender.The best of both worldsHappily, we can have the best of both worlds. It is far more efficient to burn cheap and abundant natural gas to generate electricity and then use the electricity to power trains, than it is to burn natural gas on board each individual diesel locomotive unit. Difficulty in phasing in electric motive power is often cited as a big negative factor. Whole divisions would need to be electrified at once, and wherever the electrification ended, power would have to be switched, much like Amtrak does in Washington, D.C. A recent technical paper suggests a possible means to address this problem. Slug technology is sufficiently advanced in the railroad industry that diesels and electrics could be MUed. The diesels could be powered as slugs from the electric locomotive under catenary, and the electric locomotive’s traction motors could be powered as a slug from the diesel units between electrified sections.Electrification offers a comforting diversity of fuel choices while at the same time benefiting from today’s low gas cost. Generation can switch among such sources as coal, nuclear, gas, and various renewables including solar, wind, and hydro, depending on cost and availability, with the optimal mix varying by region and from year to year.The lure of lower operating costs from reducing dependency on high cost diesel fuel can be expected to continue to gnaw at railroad managements in the months and years ahead. Quantifying the various possibilities and tradeoffs between LNG and electric operation will have the railroads’ well-paid, highly qualified consultants crunching the numbers. How it all comes out will be fascinating to watch. David Foster is executive director of a RAIL Solution, a 501(c)(3) rail advocacy group that promotes the environmental and energy advantages of rail transportation. His railroad career began with the Chicago, Rock Island & Pacific in 1966. Between 1972 and 1996, he held management roles with Norfolk & Western and successor Norfolk Southern in Roanoke, Va. He has written papers and made presentations at professional conferences, and testified as an expert witness on railroad economics and policy before the Interstate Commerce Commission. He is a member of Lexington Group in Railroad History. Email him at Dfoster342@aol.com.