Monday, June 10, 2013

Building the energy boom

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A section of track along CN’s Barron Subdivision at Weyerhaeuser, Wis., after extensive track rehabilitation work. Courtesy of CN.
Same section of track prior to rehab efforts. Courtesy of CN.
A section of track along CN’s Barron Subdivision at Weyerhaeuser, Wis., after extensive track rehabilitation work. Courtesy of CN.
Same section of track prior to rehab efforts. Courtesy of CN.
A section of track along CN’s Barron Subdivision at Weyerhaeuser, Wis., after extensive track rehabilitation work. Courtesy of CN.

Flexible infrastructure plans and strategic upgrades have allowed the Canadian railroads to take full advantage of the surge in energy- related traffic.

While all North American railroads have benefited from the current increase in energy business, the Canadian railroads are particularly well positioned along various North American energy plays. The network breadth of Canadian National Railway Company (CN) and Canadian Pacific (CP), coupled with both railroads' ability to adapt their track renewal and upgrade plans to accommodate growing traffic patterns, will allow both carriers to tap into emerging markets.

CN

Meeting current traffic volume and future growth are two factors CN uses to address the maintenance needs of its rail infrastructure. The railroad includes strategic upgrades and renewals to address emerging business needs as part of its infrastructure plan.

"Take frac sand as an example," said Mark Hallman, director–communications and public affairs. "CN has developed a highly-efficient supply chain connecting frac sand producers on its network in Wisconsin with fast-growing oil and gas shale basins in Canada and the U.S. Frac sand is used by the oil and gas industries in the hydraulic fracturing process to hold shale fractures open and let natural gas and oil flow.

"To expand its frac sand business, CN is upgrading two branch lines in Wisconsin that tap high-quality frac sand. The first is the Barron Subdivision, which was transformed from an out-of-service 80-pound rail line to a fully upgraded 25 mph, 286,000-pound car capacity line in 2013. The US$35-million project covered 40 miles of track between Ladysmith and Barron, Wis. This year, CN will finish off the project with a new US$3 million wye at Ladysmith where the branch meets CN's mainline," said Hallman.

CN's second project is a US$33-million upgrade of the Whitehall Subdivision, from Wisconsin Rapids to Blair, Wis. The improvements performed along the subdivision will allow CN to handle 286,000-pound loads along 74 miles by the end of 2014.

The railroad incorporates the ability to react quickly to address emerging markets and needs into its long-term infrastructure plan. According to Hallman, the infrastructure renewal and line capacity upgrades required for the efficient transportation of crude oil by rail are being incorporated with other initiatives, such as the railroad's ongoing coal route capacity enhancement program.

This year, the railroad has several track projects planned to bolster branch lines, which have seen an increase in traffic and improve the movement of Western Canada crude oil destined for Canadian and U.S. markets.

"Some historically lower-volume branch lines are now seeing volume increases related to crude oil. This is evident in the Bakken region in southern Saskatchewan and southwestern Manitoba, with several lines being candidates for upgrading to 286,000-pound loading," said Hallman. "This would involve new ties, rail and surfacing renewal of the existing line, some bridge work, as well as additional infrastructure. CN has already invested in new terminal trackage for some crude transload operations run by third parties, as well as in track for sidings and support facilities."

Hallman also says the railroad is planning to increase capacity on its busy Wainwright, Watrous and Rivers Subdivisions mainline between Edmonton, Alta., and Winnipeg, Man., to accommodate rising overall volumes of traffic, including merchandise, bulk, intermodal and crude oil traffic associated shipments. Yard track extensions in Symington Yard (Winnipeg), Chappell Junction (Saskatoon, Sask.) and Wainwright, Alta., extended sidings on the main corridor and discrete sections of mainline double track are included in the CA$70-million (US$67.42-million) project.

Additionally, CN plans CA$30-million (US$29.03-million) in improvements to its Prairie North Line, which runs parallel north of the railroad's main corridor between Edmonton and Winnipeg, principally between Saskatoon and Edmonton. The improved line will serve as a "relief valve" for the main corridor, providing flexibility and resilience to the network. Work will involve increases in basic capital spending for new ties and rail, surfacing, as well as new sidings to handle increased traffic volumes.

"CN continuously monitors its infrastructure capacity across every major part of the network and will continue to make strategic investments to meet capacity demands now and in the future," said Hallman.

CP

Energy-related traffic has shown progressive growth at Canadian Pacific with the railroad moving 500 carloads in 2009, 2,800 in 2010, 13,000 in 2011, 53,500 carloads in 2012 and 2013 on pace to move 70,000 carloads. Most of the growth has been from the Bakken region and Western Canada and CP expects the growth in moving oil by rail to continue.

"CP continues to work with the energy industry to develop further shipping opportunities as CP has the sufficient capacity and expertise to keep up with any expanding oil production. Our railroad has taken steps to maintain the track infrastructure to ensure we remain in position to respond to the shipping requirements of customers," said Andy Cummings, advisor, media relations at CP.

In 2011 and 2012, CP invested CA$100 million (US$96.79 million) over and above its regular maintenance programs in its Bakken region network to upgrade track and rail infrastructure. This investment included upgrading rail, re-surfacing track, installing more than 17,000 ties, upgrading switches, upgrading road crossings, as well as other area improvement projects.

"Moving forward in 2013, we have announced a capital investment program of about CA$1.2 billion (US$1.16 billion), including up to CA$100 million (US$ 96.79 million) for 2014 targeted programs that have been advanced to this year. The investments mean CP's continued enhancement of our North American network to meet growth in oil by rail and other lines of business, including grain and potash," said Cummings.

CP is upgrading the signaling system along its Midwest corridor between Moose Jaw, SK and Chicago and is also expediting two key projects including work on its North Main Line, between Winnipeg and Edmonton and its U.S. Midwest Main Line. According to Cummings, the accelerated projects are focused on productivity, safety and efficiency and involve mostly track infrastructure work, including new ballast, ties and rail.

"Rail offers unique advantages of moving oil anywhere in North America. The optionality that rail provides to quickly access a broad range of markets, at reasonable terms, is a good complement to traditional pipeline offerings," said Cummings. "With our network, which is the only North American railroad with rail-direct service to energy formations like the Bakken, the Alberta Industrial Heartland and the Marcellus Shale, CP is a flexible option for transporting crude oil and other energy-related products to anywhere in North America."

Cummings also points out the railroad is developing a strong network to handle sand, pipe and construction materials, which are necessary inputs for oil and gas shale production and will position CP to be a key supplier of sand to the growing energy markets.

"CP's proven approach to development in energy markets is to partner with key players in the oil and gas industry to jointly invest in efficient growth," said Cummings. "Our railway is optimistic about the future, given the fundamentals and levels of customer and industry investment. Our railway's strategy has been to develop multiple origins and destination points, so shippers and receivers have options. With this approach, CP is in a position to respond to the shipping requirements of producers and refiners to move product across North America."

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