Plains All American is Buying US Dev Group's Eagle Ford Crude Terminal

December 10, 2012 R.T. Dukes

Plains All American Pipeline (PAA) has reached a $500 million deal to buy four rail facilities from U.S. Development Group. One of those facilities is part of the Gardendale Rail System near Cotulla, TX.

The four facilities are rail terminals:

Van Hook Crude Terminal - New Town, ND (servicing the Bakken)
Niobrara Crude Terminal - Carr, CO
Eagle Ford Crude Terminal - Cotulla, TX
St. James Rail Terminal - St. James, LA

The three crude terminals have daily loading capacity of 85,000 b/d and the rail terminal at St. James has unloading capacity of 140,000 b/d. An unloading facility is also planned for Bakersfield California.

“Plains has proven to be a great terminal and pipeline partner for USD, and we believe that this transaction will provide for the most efficient optimization of the assets involved.”

— Dan Borgen, U.S. Dev. Group CEO

The Eagle Ford Crude Terminal receives oil by truck near Cotulla, TX, in the community of Gardendale. It's just off I-35 80 miles south of San Antonio. The facility has capacity for 200 loaded rail cars, and can move as much as 40,000 b/d. The terminal is serviced by Union Pacific Railroad and the Gardendale Railroad. Crude moving from the terminal ends up in St. James, LA, where the facility can handle 300 loaded railcars at one time or 130,000 b/d. The St. James Rail Terminal also ties into several pipelines, including one owned by PAA.

"These assets represent a very attractive addition to our existing North American rail activities...." said Greg L. Armstrong, Chairman and CEO of PAA. "Given recent and projected increases in North American crude oil production and volumetric and quality imbalances expected to occur in certain regions over the next several years, we believe that strategically located rail loading and unloading assets will continue to play an important role in the transportation of crude oil in North America."

Crude oil pricing is as dynamic as ever across the U.S. Growing production in the Bakken and West Texas have put downward pressure on WTI (priced at Cushing, OK). On December 10, 2012, WTI was trading at ~ $86.50 / bbl and Brent crude was trading a little over $108 / bbl. That's a wide spread that creates attractive crude by rail economics. Plains also has an extensive NGL rail network and expects to have as many as 6,700 rail cars under lease by year-end 2013.

Plains All American Pipeline's company wide crude oil loading capacity is now 250,000 b/d and unloading capacity is 335,000 b/d on the East Coast, Gulf Coast, and West Coast.

Read the full press release at paalp.com

Live Oak Railroad Near Three Rivers Coming

October 23, 2012 R.T. Dukes

The Live Oak Railroad will be breaking ground in November with plans to open in the first half of 2013. The new rail facility will include 28,000 ft of track located just south of Three Rivers. The facility has a great location almost halfway between San Antonio and Corpus Christi. If you have noticed, there has been a dramatic rise in rail traffic in South Texas related to the Eagle Ford boom.

Three other major railroad sites have grown significantly in recent times:

The Live Oak Railroad is being built by a partnership between Howard Energy Partners and local real estate developers. The primary purpose of the facility is to move liquid hydrocarbons - condensate, NGLs, and oil.

Why Move Oil by Rail?

It might surprise you that crude will move by rail. Approximately 1.8 million barrels per day of pipelines have been built or are under construction. That should be adequate capacity for quite some time, but that is only part of the story. WTI oil prices have been significantly discounted to Louisiana Light Sweet (LLS) in recent history (Read more at Eagle Ford Oil Prices Trade at a Premium to WTI).

There are several projects underway to move crude from WTI's trading point, Cushing, OK, to the Gulf Coast near Houston. Those projects will relieve congestion in Oklahoma, but will make supply more abundant in the Texas refinery complex.

All that to say, there is adequate pipeline capacity to get into the Gulf Coast Refinery Complex, BUT there is a lot of other oil on its way there too. If Eagle Ford operators can get their production across the state line into Louisiana, it might mean several more dollars per barrel. That's potentially millions of dollars of savings per day across the Eagle Ford. The Live Oak Railroad and others will be the primary trading points for oil if prices prove more lucrative in other areas of the country.

Eagle Ford Railroad Traffic on the Rise in South Texas

October 2, 2012 R.T. Dukes

Eagle Ford railroad traffic is on the rise. Operators are moving crude past pipeline bottlenecks, and moving frack sand and other products in to continue development.

The Hondo Railway, 30 miles west of San Antonio, serviced about 1,500 railcars per year on 13,000 ft of track a few years ago. The Railway terminal now serves 15,000 railcars per year and has expanded to 80,000 ft of track.

This year, an estimated 15,000 railcars will move through Hondo Railway LLC's 175-acre property — many of them carrying fracking sand bound for drilling operations in the Eagle Ford Shale formation.

The Hondo Railway isn't alone either:

What started at 1,600 feet of track has grown to 130,000 feet of track. Gardendale Railroad moves a mix of oil field commodities.
“The root of everything is sand,” Cundiff said. “We hadn't had any activity there in 15 years. We've gone from that beginning to 25 miles (of track) in just under 24 months.”
And at Port San Antonio, the East Kelly Railport is adding 15,000 feet of track to the existing 20,000 feet of track.
Spokesman Paco Felici said the rail port went from moving 2,594 railcars in the 2010 fiscal year to 4,556 railcars in the 2011 fiscal year.

The Port of Corpus Christi's rail expansion shouldn't be forgotten either. The port is adding the capacity to handle 100,000 railcars per year.

Eagle Ford Crude is Driving Rail Traffic Across South Texas

April 24, 2012 R.T. Dukes

South Texas rail traffic is on the rise. Some of the traffic is directly related to growth in the Eagle Ford and some is related to economic growth across the board.

The Port of San Antonio's East Kelly Railport is set for an expansion this year. Watco is expanding to occupy 20 acres of the 350 acre railport and will nearly double the amount of track it has in place from 20,000 ft to more than 35,000 ft. The development is in response to growth from serving a little more than 2,600 railcars in 2010 to more than 4,500 in 2011.

San Antonio isn't alone either. The Gardendale railroad was almost abandoned a few short years ago, but now the interchange has five switching engines running.

Frack sand silos rise above the yard and black tank cars hauling Eagle Ford crude stand ready for transport. Adjacent to the interchange, you'll see several loads of pipe waiting to be put to work. There's no doubt who is driving growth in Gardendale. It's all oil & gas.

There's enough activity that Ironhorse Resources, operator of the Gardendale Railroad, has added around 80,000 ft of track and has expansion plans that will cover more than 350 acres. The facility is built to handle 15,000 railcars per year, but that number will stretch well above 20,000 as expansions are completed.

You can read in regards to Ironhorse's facility at gardendalerail.com