Plains All American Pipeline LP (PAA) is buying three crude oil rail terminals in the Eagle Ford, Bakken and Niobrara producing regions, as well as various contractual arrangements, from U.S. Development Group (USD) for $500 million.
The assets include three crude oil rail loading terminals in the Eagle Ford, Bakken and Niobrara producing regions with an aggregate loading capacity of 85,000 b/d. The Eagle Ford Crude Terminal is in Gardendale, TX; the Van Hook Crude Terminal is in Mountrail County, ND; and the Niobrara Crude Terminal is in Carr, CO. Also included in the transaction are a rail unloading terminal at St. James, LA, with capacity of 140,000 b/d and a project to construct a crude oil unloading terminal near Bakersfield, CA.
“Given recent and projected increases in North American crude oil production and volumetric and quality imbalances expected to occur in certain regions over the next several years, we believe that strategically located rail loading and unloading assets will continue to play an important role in the transportation of crude oil in North America,” said PAA CEO Greg L. Armstrong.
Indeed. Rail transport of Bakken crude continues to grow, and transporters are investing in facilities on a pace with pipeline takeaway growth, according to the North Dakota Department of Mineral Resources and the state’s pipeline authority (see Shale Daily, Nov. 2). For instance, late last month Enbridge Inc. unit Enbridge Rail (Philadelphia) LLC and Canopy Prospecting Inc. formed the Eddystone Rail Co. to develop a unit-train facility and related pipeline infrastructure near Philadelphia, PA, to deliver Bakken and other light sweet crude oil to Philadelphia area refineries (see Shale Daily,Nov. 27).
The PAA-USD deal has received early antitrust clearance and is expected to close by year-end. Including projects in development, PAA’s North American crude oil rail business will include five loading terminals and three unloading terminals. Crude oil loading capacity is expected to total 250,000 b/d, with five facilities in or near key producing areas extending from the U.S. Rockies to South Texas. Unloading capacity is expected to total 335,000 b/d with terminals on the East Coast, Gulf Coast and West Coast. The West Coast project will connect with PAA’s West Coast pipeline and terminal network and will have access to refinery markets in both Northern and Southern California.
PAA also owns a network of rail facilities to handle natural gas liquids (NGL) that extends throughout the United States and Canada and includes 18 active loading and/or unloading terminals. To support current and planned crude oil and NGL rail transport, PAA said it expects to have about 6,700 rail cars under lease by the end of 2013.
Houston-based USD will continue to provide customer service and scheduling on behalf of PAA as part of a joint services agreement. “Plains has proven to be a great terminal and pipeline partner for USD, and we believe that this transaction will provide for the most efficient optimization of the assets involved,” said USD CEO Dan Borgen.
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