Transloading Needed Now

Lower crude prices have oil and gas industry leaders looking for ways to reduce the cost of production at well sites by streamlining the supply chain for proppant and other materials.
By Emily Aasand | January 19, 2015

Lower crude prices have oil and gas industry leaders looking for ways to reduce the cost of production at well sites by streamlining the supply chain for proppant and being able to simplify and reduce rail transportation costs.

SBG Energy Services LLC, New Frontier LLC and Dakota Transload Inc. are just a few of the transloading facilities seeing a surge in demand for services since oil prices began to drop last June. The three companies all have slightly different business models, yet have the same end goal: to reduce the cost of oil production by providing enough storage space for the required frack sand, ceramic proppant, pipeline and other energy related products.

Family Affair
Jarid Sinkler’s family has been in the oil fields since the late 1970s. His father began working for a mud company in North Dakota when he noticed trucks lined up waiting for access to saltwater disposal (SWD) sites. His father, Orley Sinkler, called Phil Gisi, Jarid's uncle,  and together they decided to put down capital and build a SWD plant.

In the beginning, the plan was for SBG Energy Services to build two disposals, but the company quickly saw the need for growth and decided to build seven.

“We looked at how the water was coming into our sites and figured it’d be convenient if we had a trucking company to haul water ourselves,” says Sinkler, vice president of business development for SBG Energy Services.

Through a close relationship and previous business partnerships, SBG Energy purchased a trucking company and started hauling water to its disposal sites. The tucking company, Rud Transportation, is operated by Gus Rud, a fourth-generation trucker in North Dakota. Rud was distributing diesel, propane and other fuels so Sinkler and his team figured they could join forces with Rud and start distributing diesel to western North Dakota as well.

“What has always been a benefit for us is being a North Dakota company with a family that’s from here and with the relationships that we have instate, opportunities present themselves at every corner and, because we’re all from North Dakota, there were relationships that were easy fits,” says Sinkler. “And I think one of the things that makes us unique is the size of our company. It’s pretty small and mostly family and because of that, we can make decisions a little bit faster than some. When we see a direction we want to take, we gather around the table, make the decision and act on it.”

After its work in the SWD business, the team knew it could operate a midstream pipeline service. SBG saw an opportunity to transport water via pipeline to SWD sites from remote areas.

“As much as we’re a trucking company, we’re equally focused on getting trucks off the road,” says Sinkler. “Gathering and pipeline for produced water has been a really good avenue for us in the last year.”

SBG Energy also offers its customers a rail service. The company has a rail spur in Bismarck that helps bring in diesel fuel and allows the company to transport the fuel from Bismarck to the oil patch.

In addition to the rail spur in Bismarck, SBG also has a rail spur in Gillette, Wyoming, and it's newest spur is a 450-acre industrial rail park being developed in Richardton, North Dakota. The Richardton project is on the Burlington Northern mainline and is approved for two new switches, and is co-located with the Red Trail ethanol plant.

"We hope to not only support the oil industry, but also the agriculture industry through this project," said Sinkler. "Because of the size of the acreage acquired, we will be able to accommodate everything from manifest loads to unit trains with plenty of storage."

With the decrease in the price of oil, one of the key things all industry players are looking at is how to reduce the cost of production in the Bakken. Sinkler says rail is going to be a huge player in reducing costs.

“There are so many things we can do and are looking into with our manifest rail yard to drop the price of production and to help everyone be more competitive,” says Sinkler.

Centralizing Services
SBG Energy isn’t the only transload company finding that simplifying rail transportation for customers is key in cutting production costs. New Frontier LLC, a Williston, North Dakota-based developer, is working on a $250 million transload facility called the East Valley Rail Project.

The project will provide inbound storage and handling of several energy related products, ranging from frack sand to tubular goods, as well as providing a fully integrated approach from source to wellhead with staff located in Fort Worth, Texas, coordinating extensively with the Burlington Northern Santa Fe network operations center as well as the local rail operational teams.

The facility is the first unit train facility in western North Dakota approved by the BNSF, which allows the company to switch cars internally versus waiting for the railroad to switch them.

“The oil prices have dropped, but none of the companies are talking about shutting down. They’re talking about efficiencies,” says Jason Everett, lead developer for the company. “Our company fits into that new model because it’s efficient from a time perspective, from a cost perspective and from a rail and location perspective because it’s located on both the state highway system and the BNSF double mainline."

Everett says that with this facility, his company will be able to handle unit trains with the cost savings running upward of $100,000 per train that comes in. If a company is moving two trains a month, that equates to $200,000 savings just on the shipment side of production.

The new facility will be one of the only transloading facilities that can unload unit trains of pipe and casing and store them on site so they don’t have to be handled multiple times before getting shipped to the final  location, Everett says.

“With this, we’ll not only be able to save money on the shipping side of things, but we’ll also be able to save money on the trucking and handling side by reducing the amount pipe movement,” he says.

The transload facility will also be able to store 200,000 tons of frack sand, will have a pipe and casing yard of 30 acres, and will have 90 additional acres of storage for things like large tanks or railcars. Based on the current market size, this facility can handle up to 25 percent of the frack sand market in the current 200-mile radius.

“We’re hearing from clients that fracking crews are literally shut down halfway through a job because they run out of sand and this facility will give them the ability to store multiple wells worth of sand so they don’t have to face running out of sand mid-project,” Everett says.

The sand storage capacity at the site means, exploration and production companies can actually forecast and store the amount of frack sand they need instead of having to have it trucked back and forth, according to Everett.

The team is also working on establishing an NGL loading facility within the property that will take the conditioned gases and ship them because there’s a lack of availability on the NGL export side, says Everett.

“We’ve always known that it was going to be key to have an NGL facility and once the regulations came on, it makes it more of a must rather than just an idea or a future plan,” says Everett.

The company will also be able to provide railcar maintenance and repair as well as railcar management and shipping management.

“All of these really make our facility a one-stop shop,” says Everett.

“We looked at the location and determined that the rail only crosses the highway at four different spots between Montana and Minot, this [Williston] being one of the main areas that it crosses a major public road,” says Everett. “BNSF has double tracked the main line from Montana to Minot so we have the ease of getting trains off the track and into our facility as optimal as we can.”

Aside from having a centralized location in the Bakken, the company is made up of a team who has a breadth of knowledge of the industry, which Everett says sets this transload facility apart from others. The background of the different partners range from commercial banking to civil construction and oil field services. New Frontier recently hired a CEO for the facility who has more than 20 years of BNSF experience at a management level and about 10 years in the transloading business.

“We strategically planned this project and the way it was set up—the location and the design,” says Everett. “Our project is more of a port than just a transload facility. We sat down and brought in a rail engineering team, a great civil engineering team and we all collaborated on how to make the most of this project.”

East Valley Rail is expecting its first deliveries in July 2015.

Ceramic Dynamic
Dakota Transload, yet another North Dakota transload facility, was established in 2012 by Ron and Josh Boyko, and although it had a slow start, it’s seeing steady growth in western North Dakota.

The company, headquartered in Stanton, North Dakota, mainly focuses on ceramic proppant transloading, but does transload other types of oilfield products including pipeline and rail.

“We transload it from rail into our facility and then reload it back into pneumatic trucks which deliver directly to the well heads,” says Luke Retterath, general manager of Dakota Transload. The 160-acre facility is currently able to unload 75 rail cars per day and load 125 pneumatic trucks per day, although Retterath says expansion plans in 2015 will increase those numbers dramatically.

Dakota Transload houses between three and four customers, including several large completion companies, according to the company.

Although Dakota Transload is small in comparison to other Bakken facilities, it has received requests to expand. But, the company believes its current approach will help it continue to thrive in the Bakken.

“We want to do the right things the right way and that’s kind of our motto and how we’re growing,” says Retterath. “We have plans in 2015 for expansion but it’s really just a matter of getting the planning done and getting all the pieces of the puzzle put together right now.”

Author: Emily Aasand
Staff Writer, The Bakken magazine
701-738-4976
eaasand@bbiinternational.com