Today’s StarTribune Business section features an article about “another case of North Dakota’s oil boom igniting spinoff businesses” – in this case the booming “oil-by-rail shipping boom,” here’s an excerpt:
Two years ago, Gabe Claypool had nothing to do with oil and railroads. Today, he is CEO of a Wayzata-based company that ships 3.5 percent of North Dakota’s oil to East Coast and other refineries in railroad tank cars.
The company, Dakota Plains Holdings, is part of a revival of the old way of shipping crude oil — via rail — that last flourished during World War II. And it’s another case of North Dakota’s oil boom igniting spinoff businesses.
“If the capacity to move oil isn’t there by pipeline, the only alternative is to get it out by rail — or you stop producing oil until the pipelines catch up,” Claypool said in an interview.
Dakota Plains in 2010 opened a crude-oil-to-rail loading terminal in New Town, N.D., in the Bakken oil region. The company was among the first to see that pipeline capacity would be insufficient to ship all of the region’s oil.
Crude oil is brought to Dakota Plains’ rail terminal by truck, then put on trains of up to 120 tank cars stretching more than a mile. Dakota Plains was the first crude-to-rail terminal on Canadian Pacific’s North Dakota system, and it already has been expanded, with more growth planned.
Claypool said the company’s 1,100 leased tank cars have carried crude to Albany, N.Y.; Philadelphia; St. John, New Brunswick; Galveston, Texas, and Walnut Hill, Fla.
Today, 20 crude-to-rail terminals have sprouted along the North Dakota tracks of Burlington Northern Santa Fe and Canadian Pacific. In November, the railroads hauled 57 percent of the region’s crude.
Railroads also are making money shipping equipment, pipe and sand to the oil fields. The sand, which is mined in Wisconsin and Minnesota, is used in hydraulic fracturing, one of the technologies driving North Dakota’s oil boom.
MP: The chart above helps to illustrate graphically the “oil-by-rail shipping boom” over the last few years in the US. The American Association of Railroads reports that there were 540,563 rail car shipments of petroleum products in the US last year, a 46.3% increase over the 369,569 carloads of petroleum products shipped by rail in 2011, and almost double the rail shipments in 2009 of 277,733 carloads. As the article points out, the railroads are just one of many “spinoff” US businesses that are expanding their operations, creating thousands of “shovel-ready jobs in the process, and are now more profitable, thanks to the shale oil boom in states like North Dakota and Texas. In the case of US railroads, they are not only enjoying “oil-rail profits” from shipping the increased volume of domestically produced shale oil (domestic oil production grew more in 2012 than in any year in the history of the US oil industry), but are also making money from shipping increasing amounts of materials related to shale oil drilling: equipment, piping, and sand.