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Economy and Business


Shale drilling creates demand for short line rail
Ohio has about 400 hydraulically fractured wells producing natural gas and oil. That means increased demand for railroad capacity to move it.
Story by TOM BORGERDING


 
Black Run Terminal
Courtesy of Tom Borgerding
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In The Region:

The number of hydraulically fractured wells drilled in Ohio has now topped 800 with about half of those wells producing natural gas and oil.

While debates over safety and severance taxes continues, production is reaching critical mass. And that has created need for more railroad capacity to move the oil and natural gas from drill sites to refineries and processing plants.

For Ohio Public Radio, WOSU’s Tom Borgerding reports on how rail system improvements have rippled into Ohio towns, large and small.

LISTEN: Shale rail creating need for more railroad capacity.

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Demand spurring new rail construction
The need to quickly transport oil and natural gas liquids away from Ohio shale drill sites is spurring new short-line rail construction.  

Matthew Dietrich at the Ohio Rail Development Commission counts 32 short line railroad companies. Some struggled for years as manufacturing and coal shipments declined.  But, the new oil and gas production is throwing them an economic lifeline.

“What you’re seeing now are some lines that were either preserved and had very little traffic or were maintained but not for the coal traffic, for other traffic that developed along the line now have this resurgence of basically they’re back in the energy business so to speak, moving energy products,” Dietrich said.

Providing a critical link
Dietrich says Ohio’s short line railroads provide critical links between storage terminals and the national rail network

“What we’re facing is a bit of a challenge in Eastern Ohio in re-habbing this infrastructure to meet the need,” Dietrich said.

Dietrich says both public and private monies are being used to upgrade short line rails. And the investments are being felt in Ohio communities large and small.

Drilling impact in Frazeysburg
In the village of Frazeysburg, 55 miles east of Columbus, it’s mostly quiet on a week-day morning.

While walking along 2nd Street, the sound of front porch wind chimes blends with the occasional car or truck heading for the main village crossroads. Little-used train tracks bisect the town.

Four miles outside the village, a Texas company is spending six-million dollars to re-activate a storage and rail transfer terminal. It will be the first rail facility to haul oil and natural gas products from Ohio’s shale region to refineries and chemical processing plants.

Rail leads to more investment
Frazeysburg’s mayor, Gary Middlemus says the rail line improvements are a bellwether of more investment.

“Yes, I think it is ‘cause you can tell they’ve added on to it down there and improved it a lot so I don’t think they’ve been putting all that money in there if they don’t plan on something,” Middlemus said.

The company, Enlink Midstream says the spur railroad at Frazeysburg will move crude oil and other products at a rate of 24,000 barrels per day.

While more tank cars begin moving out of Frazeysburg, executives at a Columbus foundry are also seeing effects from shale production, not only in Ohio but nationwide.

Foundry businesses growing
Columbus Castings sales executive Jeff Laird, says the manufacturer is making and selling more heavy metal castings and couplings to railcar companies.

He suggests taking notice of that rolling train when stopped at a crossing. 

“On each end of that car you see two wheels,” Laird said. “Well, those two wheels are held together by a large casting that goes over the axles and the bearings of those cars which holds those together. Those are the castings that we make here as far as probably our bread and butter.”

Railcar demand increasing because of well production
Laird says the industry is expected to build more than 60,000 new railcars this year.

Nearly half of those cars will be tankers designed to haul oil and natural gas liquids.

Columbus Castings currently employs 900 workers. But, Laird says demand for new railcars will likely require more employees.

“Given more volume business we would pick up and add a complete second shift,” Laird said. “So, we expect business to pick up the coming months.”

Shortline rail next phase of shale play
The resurgence of short line railroads in Ohio is part of what oil industry officials call the midstream or next phase of the shale play.

Well production in counties that hug the Ohio River is substantial enough now to convince private and public investment in transportation.

So far, nine short line rail improvement projects have been started in eastern Ohio.  Continued improvements in Ohio’s freight rail network hinges on the price of crude oil. 

Listener Comments:

Great Article on Ohio Rail Industry, and especially its shortlines.

Good economic, rail industry and community news is always welcome.

Congratulations Ohio

JML


Posted by: John Licht (Kentucky) on May 14, 2014 2:05AM
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