Companies that store and move frack sand are in demand

One company situated on the edge of the Ohio River is about to pump $1.3 million into creating a better barge dock, spurred by the massive impact that the shale drilling industry has had on the business.

McKees Rocks Industrial Enterprises (MRIE) is set to begin construction on a 380-foot expansion to its main site’s existing barge services. The company moves and stores large amounts of sand used by drillers during the hydraulic fracturing process to prop open cracks in the ground to extract natural gas from the Marcellus and Utica shale plays.

Jim Lind, CEO of MRIE, said the upgrade, which includes the addition of a second dock, will increase the number of barges that can be unloaded per day from one or two barges up to three or four barges. Most of the upgrade, expected to begin in mid-May, is being funded by a more than $900,000 award from the Pennsylvania Department of Transportation.

The 100-acre facility, where frack sand shipments account for half of operations, receives sand by barges and on railroad cars dubbed small cube-covered hoppers. Each year, about 6,500 rail cars pass through the main facility.

But in the past 18 months, traffic of sand shipments by barge have increased dramatically, prompting Mr. Lind to apply for the PennDOT award.

Last year, the company unloaded about 200 barge shipments of all materials on a single river dock. With the upgrade, the company expects that number to reach more than 300 shipments by the end of the year.

MRIE isn’t the only company seeing more frack sand shipped by water.

At the S.H. Bell Co., a Pittsburgh-based company specializing in storing and moving a number of materials, both barge and rail transportation are on the rise.

Its largest facility in East Liverpool, Ohio, has seen a 137 percent year-over-year increase in sand arriving by barge. The sand coming in by rail, which makes up about 75 percent of sand deliveries, is up about 80 percent year-over-year.

Other products that flow through S.H. Bell are also on the rise. Steel and steel-related products arriving by river climbed 113 percent year over year. Meanwhile rail operations are at “close to capacity,” according to Sales and Marketing Manager Adam Bell. Mr. Bell attributed this increase to a strong U.S. dollar and increased demand for the products by oil and gas firms.

“The fact that companies like ours can receive both barge and rail is appealing to [sand customers] because they have the option should anything happen to either of the supply chain modes,” Mr. Bell said.

Recently, frack sand deliveries across the country have been mired by shortages in the number of railroad cars available to move the material, causing some suppliers and end users to look to alternative transportation. But those shortages are easing up.

As late as the fourth quarter of 2014, analysts predicted that there would be a shortage through 2015 in small cube-covered hoppers dedicated to frack sand delivery. Some predicted that those shortages would continue as late as 2017.

However, those projections have since taken a big haircut due to dropping oil prices, according to Samir Nangia, a director at IHS Inc., who estimated that there could be an oversupply of hoppers this year due to a predicted 14 percent decrease in frack sand demand coupled with increasing car supplies.

“Prior to the recent downturn in the market, strong demand in not only the Marcellus and Utica shales, but also other shale plays... led to some car shortages,” said Ryan Fischer, assistant vice president for emerging markets for Genesee & Wyoming Railroad Services Inc. “This prompted sand shippers to seek more efficient use of cars through strategies such as dedicated unit trains, as well as creating more sand storage at their rail destinations, versus using railcars as storage.”

Mr. Fischer said these strategies are still on the rise. G&W Railroad, a Connecticut-based short-line railroad company, serves a number of transloading facilities in the region, including MRIE.

In 2009, over 760,000 carloads of crushed stone, sand and gravel, which includes frack sand, were moved across the country, according to the Association of American Railroads. Over the years, that number has steadily risen. Last year, it was at 1.2 million carloads. The movement of these materials accounts for about 4 percent of total rail traffic in the United States.

At Middleton Properties West, LLC, an Aliquippa-based company that originally opened with a focus on barge deliveries, frack sand has grown the business dramatically. Two years ago, the company received about 10,000 tons of frack sand per month by both barge and rail. Now, the company receives about 50,000 tons per month — 20,000 tons by rail and 30,000 tons by barge. Frack sand deliveries now make up about 80 percent of the company’s business.

Both Mr. Bell and the owner of Middleton Properties, Jim Lambert, said while many suppliers and end users would ideally use rail, barges provide a reliable method of transportation.

“A year ago when the fuel prices were high and they were drilling for oil, you just couldn’t get rail cars,” Mr. Lambert said. “Still just [barge] or [rail] wouldn’t be able to handle demand. You need both to keep up with it.”

Braden Kelner: or 412-263-1969.

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