Rail Industry Benefits from the Shale Revolution

Here's another example of how the shale revolution and energy prosperity are working their way down the supply chain, and revitalizing the support industries that supply materials, inputs, and drilling equipment to the shale industry.   I've reported before how the shale boom in North Dakota, Texas, Ohio, Pennsylvania and elsewhere has boosted the demand for Midwest sand found in Wisconsin and Minnesota that is ideal for use in the hydraulic fracturing drilling process, which has brought "sand prosperity" to America's new "sand box," and created many new "sand millionaires."

Now the frac sand boom and sand prosperity are revitalizing another industry - the railroad industry in Wisconsin and Minnesota that ships the frac sand to nearby North Dakota, as the StarTribune reports:

Hydraulic fracturing has created a major new business for railroads, because each horizontal well requires between 3,000 and 10,000 tons of sand. Drillers in North Dakota and elsewhere need the sand -- together with water, chemicals and organic lubricants -- to break up shale thousands of feet underground that holds natural gas and oil.

The demand -- about 60 new sand mines are in the works in Wisconsin -- is reviving sleepy trade routes. Railroads are striking deals with a spate of new sand processing plants, bringing dormant rail lines back into service, upgrading tracks and building rail yards and loading facilities across the Upper Midwest.

That has helped small-town industry that depends on freight trains, helping preserve jobs and clearing the way for industrial development.  All the major railroads are expanding across the region to accommodate sand in one way or another.

In two years, Union Pacific recorded a 265 percent increase in frac sand shipments. The railroad has rebuilt interchanges in Wisconsin, lengthened track at a Mankato rail yard and will lengthen another track this year. The company built a side track at Bricelyn, Minn., lengthened several tracks at a rail yard in Council Bluffs, Iowa, and is considering four more yard improvements in Wisconsin and Iowa.

Over the past six months, Canadian Pacific has struck deals with new sand-processing plants in Tunnel City, Oakdale and Sparta, Wis. The company is building a facility in Makoti, N.D., where sand will be loaded on trucks and driven to wells in the Bakken oil fields of North Dakota.

Unless energy companies figure out a less expensive way to get oil and gas out of the ground, they're going to need sand from Wisconsin and Minnesota, said Jean-Jacques Ruest, chief marketing officer for Canadian National. He expects railroads to be busy in western Wisconsin for 10 years, probably 20, maybe 30.

MP: Through its impact on the entire supply chain, the shale revolution is delivering a huge multi-billion dollar economic stimulus to the U.S. economy and creating thousands of new shovel-ready jobs.  Not only is the shale revolution bringing thousands of new direct jobs and economic prosperity to North Dakota and Texas, but it's also creating thousands of new jobs and prosperity in Wisconsin and Minnesota working in the frac sand industry, and it's now bringing jobs and new investment to the railroad industry in Wisconsin and Minnesota.  As the StarTribune article points out, the "added rail service doesn't only benefit energy companies," but provides benefits for many small and large industries that operate near the rail routes and depend on rail service to deliver their products to the market.  Count those as even more additional indirect benefits to the economy from shale.

Welcome to the shale revolution!