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MarkWest in Deal to Buy Ohio Rail System

Major Utica Shale player MarkWest Energy Partners LP is buying a 36-mile railroad after reaching a tentative agreement with the Columbiana County, OH, port authority.

The port authority's board entered into the transaction with the midstreamer's subsidiary Mule Sidetracks LLC for $3 million to buy the Youngstown & Southern Railroad Co. (YSR), which runs from Boardman, OH, through the Columbiana County communities of Columbiana, Rogers and Negley before terminating near Darlington, PA.

MarkWest, by itself and with partners that include The Energy and Minerals Group (EMG) through MarkWest EMG Utica LLC, is heavily involved in projects across the Appalachian Basin (see Shale DailySept. 27). The operator now has 22 major projects under construction, and in the Marcellus and Utica shales alone, the company plans to invest $20 billion to build facilities (see Shale Daily, Nov. 11, 2012).

"MarkWest has not yet said what they intend to do, but we believe [the railroad line] will facilitate their ability to do additional development in the region since they've already invested over a billion dollars in the state of Ohio," said Port CEO Tracy Drake. "We would like to see some of that investment come our way."

The port authority expects the railroad to be used to "deliver products for MarkWest and others that will come on board," Drake said. However, MarkWest officials have declined to disclose their ultimate plans "because it's a very competitive business."

As part of the transaction, the board approved an agreement with YSR, which now operates under an existing lease, to continue operating. YSR would pay the port authority $25.00 for every freight rail car hauled on the line that is more than 1,000 carloads/year. The agreement would end in 2024 or when the YSR has paid the port $350,000, whichever comes first.

MarkWest has no interest in operating a railroad, Drake said.

YSR, which was purchased in 2000 by the port authority, is used to haul pipeline to operators in the Utica and Marcellus. It also is connected to a landfill for demolition materials near Negley.

 The transaction was expected to close by the end of the month if approved by the U.S. Surface Transportation Board.

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