By Deane C. Foote, CEcD, President/CEO, Foote Consulting Group, LLC
It was a cold snowy morning in early 2005 in Minot, ND; members of the Minot Chamber of Commerce and the City of Minot had gathered to hear the results of an intermodal development feasibility study that I was a part of while working for Carter-Burgess. Our advice to them had been to proceed with the development of the project, which would initially load and move regional grain products and other products such as oil—as the market would warrant—to the West Coast ports of Seattle and Vancouver. They were nervous, asking, “What else besides grain could be transloaded, and what will come back in?” But they followed our recommendation and proceeded with the development of the new Port of North Dakota near Minot.
The rest is, as they say, history. The Port of North Dakota
(www.ndportservices.com) has become one the most successful intermodal projects in the world, moving more oil-related products than any project of its size. It is located in the heart of the Bakken oil patch, one of the richest finds of shale oil ever discovered in North America. The mining of shale oil/gas using fracking technologies has transformed this industry, and the massive new volumes are rapidly helping lead America toward oil independence.
The Port has aggressive growth plans too. The Port had 72 employees in 2012, far more than the 40 employees that officials figured the Port would have four years into its operation. This year, the Port will have, in the neighborhood, of 200 to 250 employees. As the proposed expansion gets built out, that number will grow. Future employment is unknown, but could be as high as 2,000 workers. Plans call for increasing the Port’s capacity to handle more business and larger trains. The Port would add about 3,000 acres to the North.
The flexibility of moving oil products via rail has become a Godsend – thanks to the community leaders in Minot, showing that vision for success, back on that cold, snowy morning.
Alternatives for the transport of oil/gas products are limited to pipeline, rail, and truck.
Pipeline is, by far, the low cost alternative; but offers little flexibility as to where the product goes (it flows from point A to point B). Trucking is the most flexible, but very expensive. Rail can offer both flexibility and competitive costs.
So, more and more oil products are moving via rail today, and these volumes are growing rapidly. However, oil must be transloaded from truck to rail at strategic intermodal centers, like the Port of North Dakota. Important elements of a successful intermodal project include:
• Access to regional market commodities
• Access to a railroad mainline or shortline connecting to a mainline
• Physical ability/permission to spur off of the mainline with loop tracks
• Good interstate or four-lane highway connections
• Trans-loading equipment and infrastructure
• Fully improved industrial sites
Let’s fast forward to 2012 and our exciting involvement with a new intermodal project near Gallup, New Mexico. There are currently significant volumes of crude oil coming out the Mancos shale oil play in the San Juan Basin, located in the Four Corners Area (New Mexico, Colorado, Arizona, and Utah). Oil producers are in need of a cost saving means of transporting crude to markets in California and the Gulf Coast. Rail via intermodal could provide this cost savings.
Recent exploration for Mancos shale oil may lead to increased crude oil production.
Successes so far appear to be limited, but exploration is in the early stages (the Bakken oil play in North Dakota was in an exploratory stage for three years before wide-scale drilling began).
There are mixed opinions on this subject, and it is still too early to predict future volumes. If exploratory success pans out for “wildcatters,” the larger companies with large lease holdings would likely follow into this market. Much will depend on the worldwide demand and price of oil, however, our market analysis results look positive for proceeding with further intermodal development.
Engineering design and layout for the Gallup project are proceeding nicely and prospects are being pursued and secured. Aggressive future growth is planned. The insightful vision of the community leaders in the Gallup area could very likely lead to “Port of North Dakota-like successes.”
So where will the next strategic intermodal centers be located? To match demand, the major railroads are planning and building them, of course. But the most successful ones will be cooperative projects involving community leaders, the railroads, and private developers – much like the Minot and Gallup models.
The map of national shale oil play zones may also show those next “hot spots” for intermodal development. Major shale oil play areas not already mentioned include:
• Anadarko-Woodford in West-Central Oklahoma
• Eagle Ford in Southwest to East Texas
• Granite Wash in the Texas/Oklahoma panhandles
• Marcellus in Pennsylvania
• Niobrara in Colorado, Wyoming, Kansas, and Nebraska
• Permian Basin in Texas
The road to development success may not be a smooth one. For example, several communities in Colorado are pushing for an oil fracking ban in their cities. And some shale oil deposits are projected to “peter out” sooner than once projected. But the risk, and the jobs that this risk might bring, may be worth the gamble.
In conclusion, community leaders and developers located in one of these shale oil play regions, wishing to see intermodal development success, should thoroughly do their homework.
• First and foremost, bring that vision for success!
• Put together the right public/private team
• Do your market analysis with the right consultants
• Do the right intermodal feasibility/engineering studies with the right consultants
• Be willing to take some calculated risks
