Appalachian Basin

Rail Industry Key to Utica Shale’s Success

The current buzz concerning Ohio’s Utica Shale is midstream development.  People want to know when and where processing facilities and pipelines will come online so producers can start getting more product to market.  What isn’t often talked about, however, is how things are transported until those come online, and how the processed liquids will be transported once Ohio does have more midstream capabilities. For many companies, the answer is rail.

In the beginning of the state’s shale development, rail saw an uptick in business from transporting materials like drilling fluids and other necessities for actual production.  Companies like Norfolk Southern took advantage of the opportunity to move large volumes of material — activities that, by the way, require stringent regulations for safety.  Rail companies have a history of moving such materials and also have extensive networks throughout the United States.  Ryan Fischer, assistant vice president of emerging markets for Genesee & Wyoming Inc, explained that the Utica region is no different:

“We’ve got a pretty good network in the Utica, from Youngstown to the Ohio River.” —Ryan Fischer (Railroads Ready for Utica Shale Midstream, 9/10/12)

While companies are still waiting on midstream capabilities throughout the region, rail is filling in for pipelines.  Piping networks take time and billions of dollars of investment.  Without pipelines, companies have to find another way to move large volumes to refineries and processing facilities, which makes the existing and extensive network of railroads a natural fit.

Rail companies are also aiding in developing these midstream capabilities.  The Columbus & Ohio River Rail Road Co.’s (CUOH) mile-long siting to the new natural gas processing, fractionation, loading facility and terminal in Scio is in its final construction stages. The plant in Scio is part of the $900 million Utica East Ohio Buckeye natural gas processing project.  CUOH signed an agreement in December to serve the Scio plant, which is expected to ship 10,000 carloads of natural gas liquids each year.

John Murray, assistant vice president of sales and marketing for Ohio Central Railroad explained how the rail project will affect Ohio’s shale industry:

“It will be a very efficient means of moving a lot of product in and out of the area…It will have minimal impact, yet help bring about economic development of the shale play…It’s going to be key to increased drilling.” —John Murray (Rail siding a ‘game changer’, BHJ told, 5/23/13)

CUOH also is rehabilitating a three-mile storage track and spent $2 million to upgrade its main rail yard in Newark because they expect more growth from Utica Shale business. They also expect to hire as business increases:

“It’s probably just the beginning. We’re volume driven: The more business comes to the railroad, the more people we’ll hire, the more infrastructure we’ll add. I fully expect to see employees and infrastructure added as our volume increases.” —John Murray (Rail siding a ‘game changer’, BHJ told, 5/23/13)

With more projects seeing their completion leading to more product being produced, it’s clear this won’t be the last news of revitalization to one of the country’s oldest forms of transportation — thanks in large part to the responsible development of shale.

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