Fracking Sand Spurs Grain-Like Silos for Rail Transport

Picture of Burlington Northern and Santa Fe Railway Covered Hopper Car - Image Credit - BNSF.com

Picture of Burlington Northern and Santa Fe Railway Covered Hopper Car – Image Credit – BNSF.com

By Thomas Black Apr 17, 2014 – Bloomberg

The U.S. shale oil boom is putting millions of tons of sand onto North American railroads, enabling carriers to pack trains full instead of hauling just a handful of cars at a time.

With help from Union Pacific Corp. (UNP) and Warren Buffett’s BNSF Railway Co., the sleepy silica sand industry that once mostly supplied glassmakers now ships more than 20 million tons of the material a year. Buyers including Halliburton Co. (HAL)and Schlumberger Ltd. (SLB) use the sand in hydraulic fracturing at oil fields in Texas and North Dakota.

Miners such as Emerge Energy Services LP, U.S. Silica Holdings Inc. (SLCA) and Hi-Crush Partners LP (HCLP) are taking a page from the grain industry’s playbook to deliver sand faster and cheaper. They’re building facilities at their mines to load unit trains, which move just one type of cargo, and near oil fields to empty them.

“The customers more and more are saying ‘We don’t want the headache of logistics. That’s on you,’” Rick Shearer, chief executive officer of Southlake, Texas-based Emerge (EMES), said in an April 14 phone interview. “We’ve scrambled to put in a network of storage and trans-load sites all over North America.”

100 Cars

For decades, sand-mining companies catered mostly to glassmakers that sent a few rail cars, said Shearer, whose company was created in 2012 by combining Superior Silica Sands with two energy-service firms. Now, with fracking helping drive oil output, Emerge fills trains pulling 100 cars on newly laid track from shiny metal silos.

Unit trains will move about 25 percent of sand sent to oil and gas users this year, a fivefold surge from 2013, and the share could rise to 50 percent in the future, according to U.S. Silica. Union Pacific and BNSF, the two major carriers in the western U.S., are poised to benefit from shale-oil production in the region and sand mines in WisconsinIllinois and Minnesota.

“The whole shale development for us is great,” Union Pacific Chief Executive Officer Jack Koraleski said today in a telephone interview. “We move so much frac sand and so much pipe, that’s really our key franchise strength.”

U.S. frac-sand shipments jumped more than fourfold to 20.9 million tons in 2012 from 4.9 million tons in 2007, according to Freedonia Group, a Cleveland-based market researcher. Demand is expected to more than double to 52.1 million tons by 2022, Freedonia said.

Continue reading article at Bloomberg

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