Rail Comes of Age Shipping Crude by Rail Has Emerged As One Critical Link in a Growing, Interlinked Supply Chain

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Rail Comes Of Age Shipping crude by rail has emerged as one critical link in a growing, interlinked supply chain.

By Gregory DL Morris

n just a few years, crude oil trans- Terminal model terminal will handle inbound frack sand portation by rail has moved quickly Far out in the New Mexico desert may be and outbound crude and condensate. Ifrom stopgap expedient, to booming an example of the intermodal future of Outbound service will be provided via rail growth industry, to beleaguered necessity. crude handling. and pipeline. A few, high-profile accidents have cost When the Rangeland Integrated Oil Crude oil will come into the RIO Hub via both lives and credibility, but have also (RIO) terminal comes into service truck and pipeline. Rangeland Energy is sup- brought shippers and carriers together to near Loving, N.M., in the fourth quarter, ported by an initial $200 million equity com- establish best practices, and the first fruits it will be the first of a new type of inter- mitment from EnCap Flatrock Midstream. of that has been new standards for tank modal facility. The integrated system of Transloading between truck and rail cars. Those are being phased in over the terminals and pipeline is designed to ag- was to begin in October. Initial through- coming years. gregate crude oil and condensate at the put capacity for outbound crude oil and That is good because behind the lurid RIO Hub and deliver it by pipeline to the condensate will be 10,000 barrels per day headlines, volumes of crude oil moved by market center at Midland, Texas, for (bbl/d). As demand increases, Rangeland rail have continued to grow. transport to the Cushing, Okla., oil trad- will build high-speed unit train loading fa- Producers and refiners reiterate that it has ing hub or the Gulf Coast—or transport it cilities to take capacity to more than become an essential part of the supply chain, by rail to refining centers and other mar- 100,000 bbl/d. while railroads and terminal operators con- kets across North America. The facility will also have the capacity to tinue to invest in infrastructure to handle The RIO Hub lies in the center of the accommodate more than 500,000 tons of higher volumes. Beyond the pure numbers, Delaware Basin’s rapidly growing hori- frack sand per year. When unit train service many operators are expanding into full in- zontal drilling activity. The facility is situ- begins and demand increases, Rangeland termodal services, linking road, rail, pipeline, ated on a 300-acre site in Eddy County, will expand sand infrastructure to more than and waterborne transportation. N.M. Served by the BNSF Railway, the rail 1 million tons per year.

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Despite multiple challenges, the dawn of crude by rail grows brighter. These tank cars wait for loads at the COLT Hub terminal in Epping, N.D. Source: Crestwood Midstream Partners LP

Rangeland is negotiating now with an That’s all very impressive. But note: enhancements and increased capacity for oilfield services company to provide frack This complex will serve Permian truck offloading and rail car loading. sand rail unloading, storage and distribu- Basin producers—not the rail-centric tion, Chris Keene, president and CEO of Bakken play. More connections Rangeland Energy LLC, told Hart Energy. And RIO will not be alone. Nearby, Rangeland expects to establish connec- “We are in advanced discussions with Murex LLC and Cetane Energy LLC re- tions to various pipelines due to come on several refiners, marketers and producers cently agreed to capital improvements at line late this year. to provide outbound service for crude oil their Cetane transloading terminal at “When we decided to enter the and condensate,” he added. Carlsbad, N.M., that will double the facil- Delaware Basin we looked to current The first 30-mile leg of the RIO ity’s operational capacity. The existing unit drilling activity and production,” said Pipeline will connect the terminal to train terminal was to begin improvements Keene, “but we paid even more attention Rangeland’s State Line Terminal, a gather- in the late third quarter that will allow for to where we think production will be five ing hub at the Texas-New Mexico border the loading of 40,000 bbl/d of oil following to 10 years from now. We want to be in where the company will provide tankage completion in July 2015. the heart of that activity with the ability and truck unloading facilities. A bi-direc- Initially, Murex and Cetane installed to touch the majority of production oc- tional pipeline will allow for the move- 40,000 bbl of crude oil storage, 12 curring within a 75-mile radius of the ment of crude from the State Line tank truck offloading stations and more RIO site. We’re very bullish on the geol- Terminal north to the Rio Hub or east than 18,000 feet of track to accommo- ogy in the Delaware. With eight or more along a 104-mile route to the Midland Ter- date unit train loading at the facility, pay zones, we continue to believe that minal, which will provide connections to which shipped its first oil in December drilling programs will extend for 20 to 30 existing and planned interstate pipelines 2013. The expansion will include addi- years. We are even more confident about to Cushing and Gulf Coast markets. tional on-site storage, further rail track our forecasting today.”

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Total throughput for Plains as an or- ganization is 3.7 million bbl/d of crude, NGL and refined petroleum products, and the company is exploring every intermodal “We’re very bullish on the option for shippers: rail, truck, pipeline, geology in the Delaware. With water and all combinations of those. “Producers are very much focused on eight or more pay zones, we takeaway capacity, however that can be continue to believe that achieved,” said Keffer. “Rail has added options for them, and not just in the drilling programs will extend Bakken, in Colorado, West Texas, South for 20 to 30 years. We are Texas and Canada.” even more confident about Refiners, in contrast, are often more limited. our forecasting today.” “The East Coast in particular is not really very flexible. They primarily receive — Chris Keene, president and CEO, from the water,” Keffer added. He notes Rangeland Energy LLC that interests in the Gulf Coast are devel- oping an idea to load ocean-going barges to supply East Coast refiners. “Crude by rail has opened the door For capacity to match production, that The West Coast, both northwest and for refiners to optimize their feedslates strategic view is essential. But for markets, southwest, are the emerging destination with lots of different crudes,” he said. the focus has got to be much more tactical. markets, John Keffer, vice president of Plains is also expanding its fleet of rail- “The Gulf Coast market has been terminals for Plains, told Hart Energy. cars available for shippers to lease. “Our flooded with light, sweet crude,” added “The Bakersfield terminal will connect current fleet is 3,500 cars in crude serv- Keene. “Rail has opened options that to our existing pipeline structure, includ- ice and 3,900 for NGLs,” said Keffer. “Of were otherwise limited. Sending conden- ing southbound lines to the Los Angeles the crude cars, only 9% are the older sate to Canada for use as a diluent for bi- area and northbound lines up to the San DOT-111s and those are being phased tumen is one option. Accessing the West Francisco area. Our current permit is for out. We have ordered about 1,800 new Coast by rail is another alternative for one train a day, but we are building the cars and the first of those will start arriv- light crudes and condensate.” operation to be able to expand. There is a ing in the third quarter of 2015.” great deal of interest in California, which Open the Golden Gate is still dependent on waterborne crude Big plans and small Production volumes will continue to from Alaska and South America.” Other midstream operators plan to move grow, Keene is sure, “and producers crude to the west, as well as north, south will seek the destinations that offer the Here to stay and east. Supply-chain operations firm highest netbacks. Production will find its Continued investment on the part of Savage, based in Salt Lake City, has re- way to a refinery, or to a [condensate] Plains and other operators is a clear indi- cently doubled the size of its Trenton, splitter for export, or directly to an ex- cation that crude by rail (CBR) is not just N.D., crude loading terminal to ship two port terminal to pursue the option of a a temporary expedient to get stranded unit trains per day and has also brought higher-value international market, now barrels out of the Bakken. into service two other facilities in re- that the export ban has been relaxed for “It may have started as an interim so- sponse to a shortage of outbound capac- condensate. Now that it has been, we lution, but from our perspective it is a ity in western Canada. may see export terminals on the West permanent part of the supply chain,” said The Northern Sunrise Crude Terminal Coast crop up to serve Latin American Keffer. “In any event, it has been more ro- northeast of Grande Prairie, Alberta, in or Asian markets.” bust than we originally anticipated.” the Peace River Region, has direct access Plains Marketing, a subsidiary of He elaborated: “Our expectations were to the Canadian National Railway (CN). Plains All American Pipelines, operates less than what we have seen. The Bakken The terminal’s first phase transloading five crude-oil loading facilities with total and the Rockies have just grown and capacity is 25,000 bbl/d, or 1,500 cars per capacity of 210,000 bbl/d, and two grown and the need for additional facili- month, of crude on a manifest basis. A unloading terminals with total capacity ties has grown substantially. We would second phase will allow unit train opera- of 280,000 bbl/d. A new unloading facil- like to see even more volume moving by tions. Northern Sunrise also has 160 stor- ity is under construction at Bakersfield, rail, but everyone is looking for more age spots with inbound and outbound Calif. It will have an initial capacity of space on the rails.” track access. 70,000 bbl/d, or roughly one unit train Keffer notes that all the Class 1 rail- The Unity Petroleum Rail Terminal in per day when it comes into service, roads are making capital investments that Unity, Saskatchewan, has direct access to scheduled in October. will benefit all traffic—not just crude. the Canadian Pacific Railway (CP) and

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has 45 rail car spots for capacity of 5,000 Calif. It also has a refinery at Kenai, North Slope crude has been the dominant bbl/d or 275 cars a month. Alaska. The refineries serve an extensive feedstock for West Coast refiners for years “We continue to see growth in ori- retail fuel operation west of the Rockies. with some trans-Pacific shipments from In- gins,” Nathan Savage, senior vice presi- Savage suggests such a facility could dis- donesia and elsewhere. dent of the Savage oil and gas midstream place about 30% of crude currently im- group, told Hart Energy. “But there are ported for use on the West Coast. “It’s a More than differentials also a lot of refineries now building direct large project with big implications for crude As a firm with a large transloading pres- receiving facilities. That is directly dis- by rail in the Northwest,” he said. Alaska ence, Savage is agnostic about mode, but placing imported crude.” Kirk Aubry, president and COO at Sav- age, added, “We are very confident about Savage recently doubled the size of its Trenton, N.D., crude terminal, which can now handle two the role of crude by rail in the supply chain. unit trains per day. Source: Savage This part of the business is still sorting itself out, but it’s maturing very quickly.” Savage and refining and marketing company Tesoro Corp. have proposed a new terminal at the port of Vancouver, Wash.—across the Columbia River from Portland, Ore.—where as much as 360,000 bbl/d of oil could be transferred from rail to marine vessels for final deliv- eries to refineries all along the West Coast. Tesoro is a major West Coast downstream operator with refineries at Anacortes, Wash., and Martinez and Los Angeles,

BNSF dominates crude-by-rail shipments out of the Williston Basin. This unit train races through snowy Wisconsin countryside, moving more oil to market. Source: BNSF Railway Co.

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Savage would like to put to rest the idea supply chain. And we are an important He joined Inergy when it acquired the that CBR can’t coexist with pipeline. conduit between the shippers and carri- COLT Hub in late 2012, prior to Inergy’s “As a practical matter it is not ei- ers. As the field leans out, you will see merger with Crestwood Midstream in ther/or. It’s both. They are complemen- more folks like us who are committed,” October 2013. tary. Both producers and refiners like to he added. “We built the first terminal from have options. There are locations that scratch, so I have seen that maturation cannot send or receive by pipeline and The takeaway priority process firsthand. There is some pride the way rail has evolved has given those “In macroeconomic terms, crude by rail of ownership, or at least of authorship,” shippers all kinds of new possibilities,” is absolutely here to stay,” Brian Freed, said Freed, adding that the model is Savage explained. vice president of crude logistics at Crest- evolving from toll-throughput to inte- He adds that supply chain efficiencies, wood Midstream Partners LP, told Hart grated services. more so than crude differentials, are Energy. Crestwood owns and operates What has not changed for CBR is a going to make the difference for refiners. the sprawling COLT Hub Terminal in focus on long-term contractual business “The crude buyers know what is Epping, N.D., just northeast of Williston with specific shippers and consignees. out there, it’s not like there are a lot of as well as a 50% interest in the Powder “The majority of our customers are secret crudes. They have done a great River Basin Industrial Complex terminal actually refineries. They are buying bar- job of taking advantage of what is now in Douglas, Wyo. He said that CBR on its rels in the field as close as they can get to available to them,” he added. In addition own—and and as part of an integrated the wellhead. We have dedicated tanks, to its own several crude loading termi- supply chain with terminals, water, road, dedicated truck racks, and pipeline con- nals, Savage operates unloading facilities and pipeline connections—is “working nections. The closest we get to spot busi- at several refineries, including some of well for many people and is rapidly ness is when a contractual customer asks Tesoro’s plants. maturing.” He emphasized that CBR is for increased volume,” he explained. The maturation process of which maturing, with all the implications of And volumes are rising, said Freed. Aubry spoke was only accelerated by the that word. Acknowledging reports that Bakken pro- Lac–Mégantic, Quebec, tragedy last year. Freed was present at the creation of duction has begin to show fluctuation, he “We are seeing a leaning-out among CBR as it is known today: He led the de- says terminal throughput is still rising. the operators,” he observed. “You can’t velopment team for Rangeland Energy “We are moving record volumes. Our dabble in this business. You are in or when it built and opened the COLT ter- peak was not 2012 or ’13 but the last four out. If you are in, you have to have minal in June 2012. It was one of the first months [of 2014].” the equipment and the training to do major, purpose-built Bakken facilities, it safely, to work with all the regulators built as the unconventional shale play Expedient to necessity and trade groups. One thing the acci- rapidly increased production. It was The reason for that, Freed said, is that dents have done is to bring together given an appropriately prosaic name: while CBR began as an expedient, it has the industry to look at the safety of the Crude Oil Loading Terminal, or COLT. quickly become a necessity.

Tanks cars await filling at the new Black Thun- der terminal in Campbell County, Wyo. A joint project of Meritage Midstream Services LLC and Arch Coal Inc., the operation draws on existing rail infrastructure built to handle the Powder River Basin’s extensive coal out- put, served in part by the high-speed coal loadout in the distance. Source: Meritage Midstream

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“To get to the Northeast or to the Pa- cific Northwest, there are no pipelines in existence or even proposed. What are the chances of a pipeline across the Rockies? Slim to none. Pipeline to Philadelphia? Slim to none. That is why the West and East Coast refiners have invested in “In macroeconomic terms, receiving terminals, so they can bring in the best barrels for their facilities,” crude by rail is absolutely he said. here to stay.” At an increasing rate, Freed added, he is seeing “disintermediation. The refiners — Brian Freed, are hooking up with the producers di- vice president of crude logistics, rectly. And it’s not just in the Bakken, it’s Crestwood Midstream Partners LP in the Niobrara, the Powder River Basin and Canada.” That said, the process has not been en- tirely smooth, nor could it be. “This process of getting crude in mo- tion is a basin-by-basin process. Some basins are already over-served, at least at present, but others are not.” Taking a At an arb of $7 a bbl or less, then sure, until 2016. So if you want to say there is step back, Freed noted that “over-served” there is probably too much takeaway ca- too much for 2014, fine, but can you say only pertains to the midstream. “For pacity. But we saw production from that for 2015?” he asked producers, the priority is always takeaway North Dakota increase 30,000 bbl/d from As with any large-scale industrial op- capacity. There really is no such thing as April to May. There are ebbs and flows eration, capacity additions will always too much.” now, it’s not a straight line any more. But come in large chunks while demand The same goes for refiners. this is hardly slowing,” Freed said. changes incrementally—and rarely are Adding time brings a fourth dimen- the two evenly matched. It’s all relative sion to the CBR calculus. “It is likely that someone will build an- But even in the midstream, over-served “It could be fair to say that there is other terminal,” said Freed, “but it is defi- is relative. more takeaway capacity in the Bakken nitely easier and more economical to “The desirability of Bakken crude has than is needed at this moment. But there expand existing facilities than it is to a lot to do with the arbitrage vs. Brent. are limited pipeline increases coming build a new one from scratch.”

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rail or rail to pipe, to traditional light barrels,” Cairns said. “Not only does rail reach crudes that have no access to pipeline, there is actually an economic advantage to moving heavy crudes, “Our planned expansions neat, by rail without diluent.” will be needed for the ter- New cars, new terminals minal to accommodate the The list of types of crude moving by rail prolific drilling and pro- prompted Cairns to dispel a miscon- duction activity taking ception about CBR. “The Bakken is unique in the fact that so much of the place in the area.” production is moving by rail. Outside of the Bakken, rail is really just a bite of — Steve Huckaby, CEO, a slice of the pie.” As a result, he ex- Meritage Midstream Services LLC plained, there are many avenues to growth all along the supply chain. “Rail is still such a small player, overall, in the crude supply picture that we can see big changes in volume.” As that volume grows, the CN re- As proof of that Freed added, “Since haul is often less expensive and takes mains vigilant about corridor risks, the day we came in service we have significantly less time than a rail inter- both in terms of population and envi- pretty much always had some kind of change of the same length. ronmental exposures. construction on-site. Most recently, In that, the CN has a significant ad- “Following the Lac-Mégantic trage- we have added new tanks, increased vantage over all of the Class I railroads dy, the industry strengthened train- our pump sizes and added loading in North America. “We are unique as the securing practices,” said Cairns. “Within arms. We are also adding release tracks only North American railway that the CN, we voluntarily extended U.S. to expand our railcar capacity. You reaches all three coasts [Atlantic, Pacific, Department of Transportation rules could call it debottlenecking or adding and Gulf of Mexico] as well all the oil- about transloading to all of our Canadian incremental capacity.” producing regions of Canada,” said operations. We already have an annual Cairns. “We can get from northern Al- program to wayside detection, and Canadian heavy oil berta to the Gulf Coast all on our own have committed CA$10 million Rail traffic in CBR continues to rise for rights of way.” CN added to its existing (US$9.2 million) to additional monitor- Canada’s heavy crudes as well as the transcontinental network across Canada ing equipment.” light oil produced by U.S. unconven- and routes into the U.S. Midwest and While the vast majority of the tank tional shale plays. CN is the dominant New England in 1998 by acquiring the car fleets in the U.S. and Canada is rail service provider in northern Alberta Illinois Central Railroad, which linked owned or leased by shippers—not by where Canada’s heavy oil sands lie. the continent’s Chicago rail hub with the railroads—the carriers are doing The line hoped to double its crude New Orleans and the Gulf Coast. what they can above the rails. oil shipments in 2013 from 30,000 car- That vantage point also puts the rail- “We have been very clear in support- loads in 2012. The result? It moved al- way in a position to note changes in ing changes to U.S. and Canadian rail most 74,000 carloads last year—and patterns of flow. car regulations, and are already seeing already moved 60,000 just in the first “There has been high demand for the phase out of low-pressure DOT-111 half of 2014. Not only are absolute vol- crude by rail from refineries in eastern cars in crude service. We are also reach- umes booming, but so is revenue. Canada, in PADD 1 [eastern U.S.], and ing out to all emergency responders to “The length of haul is growing,” says in the Gulf Coast,” said Cairns. “The big help provide training all along the line,” James Cairns, vice president of petro- sea change is that Canadian shipments Cairns said. leum and chemicals for CN, told Hart are moving from manifest freight [sin- As old tank cars are phased out, new Energy. “Heavy crude by rail by nature gle cars or blocks of cars] to unit trains. terminals are phased in. The new Black is farther from tidewater markets than That is accelerating.” Thunder Terminal in Wyoming’s Pow- light crudes and means a longer dis- The distances crude is travelling by der River Basin came into service in tance.” rail is matched by the variety. March and is already operating at In a classic example of economies of “We move everything from neat bit, slightly above expectations. scale, higher profitability for the rail- bitumen, that has an API gravity of 8˚, “We are transloading about 8,000 road does not necessarily mean higher and Peace River Heavy, to rail bit that is bbl/d at Black Thunder,” Steve Huckaby, prices for shippers. In general, industry about 15% diluent, to fully diluted CEO at Meritage Midstream Services experts note that a longer single-line pipeline-spec crude that moves pipe to LLC, told Hart Energy. “We are slightly

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above our initial forecasts for through- was built at Arch’s Black Thunder mining the two largest carriers in the western U.S., put. We have been attracting barrels complex in Campbell County, Wyo., BNSF and Union Pacific. based on the combination of the termi- 11 miles southeast of Wright, Wyo. “Based on current production, export nal’s location and rail economics.” Meritage is pursuing long-term arrange- capacity and production in the Powder Huckaby said he expects the facility to ments with various refiners and third- River Basin seem to be at equilibrium” be at capacity of 15,000 bbl/d by year end. party marketing companies and working said Huckaby. “We believe that equilib- “Our planned expansions will be needed with various pipeline companies to de- rium will be disrupted by the inability for the terminal to accommodate the pro- velop direct connections. of current rail infrastructure to keep lific drilling and production activity taking Black Thunder has significant railroad up with production. We are launching place in the area,” he added. infrastructure in place already to serve a phased approach to expansion. Arch Coal’s big Powder River mines. The first step will bring throughput Black Thunder booms Adding CBR handling will be compara- capacity at Black Thunder to 20,000 Black Thunder Terminal is a joint venture tively easy. A big plus for shippers comes to 25,000 bbl/d by installing five to between Meritage and Arch Coal Inc., and from Black Thunder’s dual rail service by 10 loading arms, five truck offload bays,

Custom Blending May Be Next

he flexibility of crude by rail for crude buyers has given Custom blending is something that the refining industry has been more than a few people thoughts about the potential for doing for a long time, said Chris Keene, president and CEO of Range- Teven more thorough integration of the supply chain from pro- land Energy LLC. “Whether at the refinery or at the point of origin, blend- ducer through terminals, railroads and refiners. Some refiners have ing often generates a feedstock that maximizes yield. Now we’re seeing floated the idea of optimizing their refineries by custom blending terminals like RIO serve refiners as direct customers. This is a trend that a feedslate. has grown over the last few years so custom blending at the terminal “Custom blending is a story that is unfolding in the Powder River can make good sense in some situations. This will be an ongoing dis- Basin,” Steve Huckaby, CEO at Meritage Midstream Services LLC, told cussion with the RIO Hub’s customers.” Hart Energy, adding , “as we learn more about the quality of crude Keene added, “One area we’re looking at with our customers is sta- production coming from the play’s multiple stacked formations and bilizing condensate to remove the light ends to create a more stable the blends that are available, both now and in the future. Currently, we product. The economics of doing that at a centralized point in the sup- send samples and assays to refineries and they make selections based ply chain are attractive, so we are exploring building stabilizing infra- on their current requirements, but custom blending is something we’ll structure at RIO and providing those services.” ■ continue to explore.” —Gregory DL Morris

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The Port of Vancouver, Wash., has its West Vancouver Freight Access Project underway to cut rail congestion as traffic grows at the port, located across the Columbia River from Portland, Ore. The project, scheduled for a 2017 completion, includes a proposal by Tesoro Refining & Marketing and Savage Cos. for a crude terminal to serve Pacific refiners. The proposal has drawn strong opposition from some Pacific Northwest environmental groups. Source: Port of Vancouver

and one 100,000-bbl storage tank. At 400,000 tank cars loaded with crude in both the Atlantic and Pacific ports the completion of Phase II, we expect the country last year, we loaded approx- in Canada, pipelines are facing fierce to reach total storage capacity of 400,000 imately 100,000 of them.” opposition from environmental groups bbl and throughput capacity of 70,000 But importantly, neither SSC nor SST and the native First Nations. Tanker bbl/d with a 15-arm loading rack capable own any of the terminals they design, traffic is likely to get the same reception. of loading 15 to 18 cars per hour build or operate. Brock could not pro- Meanwhile, Canadian crude is already and 16 truck offload bays. Target load vide any specifics on new projects, other moving by pipeline and rail to Gulf time is a full unit train in less than than to say with a smile in his voice, “We Coast refiners. 24 hours.” are very, very busy. Each terminal is still “There are already folks in Texas A key name in CBR terminalling is a custom job, especially the loading fa- and Louisiana working on how to Strobel Starostka. Its Strobel Starostka cilities. The ability to go rail-to-pipe and get Canadian crude on the water without Construction (SSC) has designed and pipe-to-rail, integration of heavy oil, comingling it with U.S. domestic crude, built many of the loading and unloading scale, they all make each design different. which cannot by law be exported,” terminals through which the CBR boom Destination terminals are a little simpler, Brock said. is building and its affiliate, Strobel but not much.” The biggest shift in CBR, according to Starostka Transfer (SST), operates a Brock, is that refiners are taking owner- number of transload facilities across East and West ship of the supply chain, echoing the the country, including three in North That experience gives Brock broad in- trend mentioned by Crestwood’s Freed. Dakota’s Bakken Shale and two in sights on the CBR trend. Brock relates “They are buying crude all the way back Wyoming’s Powder River Basin: Crest- that “the East Coast is still building out to the wellhead,” he said. “It is such a wood’s COLT Hub; the Bakken Oil a bit, but the real attention is shifting change. The traders took the lead on Express terminal near Dickinson, N.D.; to the West Coast. That is the last frontier crude by rail, and most refiners sat back the Dakota Plains terminal near New for crude by rail. People say that and watched. But now they are jumping Town, N.D.; Meritage Midstream’s Black a pipeline could not be built through in and taking the lead. The arbitrage op- Thunder Terminal; and Eighty-Eight the Rockies, but the mountains might be portunities for stranded barrels is pretty Oil’s terminal at Fort Laramie, Wyo. the easy part compared to permitting much gone, so now the incremental “We handle 35% of the crude moving in California.” advantage is owning the supply chain. out of the Bakken by rail,” Travis Brock, For similar reasons, he suggested that Eventually the cost of crude by rail will vice president of commercial develop- Canadian crude exports may come just be absorbed into the refinery crack ment and strategy for both SSC and SST, through the U.S. Gulf Coast. Brock ex- spread. The big refiners have the money told Hart Energy. “And of the more than plained that while CBR already reaches to play that.”

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Next generation “We are very encouraged by the realize its design capabilities, and The Williston Basin will see new termi- response we are receiving from customers will have a material impact on some of nal capacity as crude production ticks and anticipate that construction will the congestion issues experienced by upward. Dakota Gold Transfer LLC plans begin later this year,” Moe told Hart all railroads.” to develop a crude transload facility, Energy. Initial truck-to-rail transload Dakota Gold Transfer Plaza LLC, in service may begin about 90 days after Clear signal Mountrail County near Plaza, N.D., to construction begins with storage New, multimillion dollar projects like the serve production from Bakken and Three and high-speed rail loading service Dakota Gold terminal prove CBR has a Forks producers. expected in the second half of 2015 green signal and clear track ahead for the Dakota Gold is a joint venture be- along with outbound pipeline service. foreseeable future. New tank car stan- tween its president and CEO, Cody Moe, Permitting and engineering are under- dards and railroad operating procedures and the TrailStone Group. TrailStone is way. Dakota Gold is also in discussions may clear up lingering safety questions. an energy asset investor and manager with various pipeline companies to Intermodal operations continue to owned by Riverstone Holdings, a $27 bil- develop outbound pipeline service from grow—making North America’s already lion private equity firm specializing in the Plaza Terminal to multiple pipe- impressive midstream infrastructure energy. Moe is a crude trucking and con- line markets. even more efficient. struction entrepreneur with seven years Dakota Gold hired a familiar name, Even California with its nearly impos- of experience in the Bakken. Strobel Starostka Construction, to con- sible review and permitting processes The new terminal will be served by the duct the FEED study. It is expected SSC may be climbing on board. CP, the distant No. 2 handler of Bakken will build the terminal and that Strobel Kern County, Calif., recently approved crude behind BNSF, and will aggregate Starostka Transfer will operate it. a CBR terminal at Alon USA Energy’s crude produced in Mountrail and neigh- “The rapid expansion of rail delivery Bakersfield, Calif., refinery. Alon boring counties via gathering pipelines of Bakken crude has created a significant shuttered the plant in 2012, throwing and trucks. Outbound service will be congestion issue in the play,” said Moe. dozens of employees out of work, and has provided via rail and pipeline. “Congestion is an issue we addressed sought to build a rail terminal that would It will have a capacity of 70,000 bbl/d when we were siting the Plaza Terminal. allow it to bring in price-advantaged do- and storage capacity of more than 300,000 First, we believe that Dakota Gold’s mestic crudes. bbl, with expansion to 600,000 bbl during decision to invest on the east side The proposed terminal would have a planned second phase. The terminal’s de- of the play will substantially increase a capacity of 140,000 bbl/d and replace sign includes two loop tracks with an ad- the efficiency of flows and traffic pat- the plant’s small, 13,000 bbl/d unloading ditional spur for train storage, a covered terns. Also, the CP Railway is making rack. Alon has indicated it may use loading barn, a 14-arm system capable of a substantial capital investment in a completed terminal on a standalone loading a unit train in about 14 hours, 15 the Bakken and on the New Town basis without reopening the refinery. truck unloading bays and three 103,000- sub line in particular. That will allow That might work, given that Bakersfield bbl storage tanks. the Plaza Terminal to more effectively serves as the center of California’s in-state oil production with significant pipelines and other midstream infrastructure in place. Valero Energy Corp., the nation’s largest independent refiner, gave up ef- “We are very, very busy. Each forts to obtain permits for its refineries in the San Francisco and Los Angeles areas terminal is still a custom job, after strong protests and long delays by especially the loading facilities. permitting agencies. Kinder Morgan En- ergy Partners operates a 72,000 bbl/d ter- The ability to go rail-to-pipe minal at Richmond, Calif., across the bay and pipe-to-rail, integration of from San Francisco—by far the largest heavy oil, scale, they all make CBR operation in the state—and has fought off efforts by environmentalists to each design different. shut it down. Destination terminals are a But despite such concerns about environmental and safety issues, the growing little simpler, but not much.” importance of rail as one of many links ■ — Travis Brock, vice president of in the crude supply chain seems secure. commercial development and strategy, Strobel Starostka Paul Hart, editor-in-chief of Midstream Business, contributed to this article.