Shale Plays a Positive for Railways in the Appalachian Basin

Posted: February 24, 2013

Railroads play an important role in shale development.

Despite the lower natural gas prices, railroads operating in the Marcellus and Utica shale areas continue to enjoy a productive year.  Rail yards are busy transporting shale development supplies such as frac sand, pipe, chemicals and other commodities. In some areas, water is also being transported by rail.  In southwestern Pennsylvania and in West Virginia, rail yards have seen an increase of business from 2011.    United States carloads of petroleum and related products posted a 48% year-over-year growth in the second quarter 2012, and railroads have ramped up for business by investing in additional freight cars for transporting frac sand.  One company purchased almost 900 hoppers in 2011, and another company allocated almost 14% of its budget for cars to transport sand. 

Rail yard growth can be seen in additional employees and in the increase in rail siding.  Real estate along railroads is a prime commodity.  Beyond inbound deliveries, there is some outbound cargo such as dirt or drill cuttings.  Utica and wet-gas areas can see opportunities of moving natural gas liquids and by-products in the future.  More processing, fractionation and storage facilities are being built, and rail companies are being asked to service them for more efficient transportation methods.  While some company representatives see the transportation of raw products for shale development being five to seven years, the outbound transportation of liquids and by-products will last substantially longer. 

For additional information, read Julie Sneider's article in Progressive Railroading