Shale spawns another rail project

SAN ANTONIO – Three San Antonio real estate developers will break ground next month on the Live Oak Railroad, hoping to snag a slice of a South Texas Eagle Ford shale rail boom.

Live Oak Railroad aims to open by late March 2013 south of Three Rivers in Live Oak County, with 28,000 feet of track along the Union Pacific line. Plans call for it to serve as a liquids terminal for natural gas and crude oil.

The project is being driven by oil and gas production in the Eagle Ford Shale, a 20-county swath of the state that stretches from the border toward East Texas.

“We’re awash in hydrocarbons, and they really don’t have a place to go,” said Barton Simpson, a partner in the rail project with Greg Seay and Ken Rector.

Simpson thinks that in the short term, there’s an immediate need to move sand for hydraulic fracturing into the region, but that rail – and not just pipelines – will be an increasingly important way to move crude oil out of the shale play.

The partners are working with San Antonio-based Howard Energy Partners, a natural gas pipeline company and an investor in the project, to develop the liquids terminal.

“They’re land experts, and we’re not. It’s a perfect partnership,” company president and CEO Mike Howard said. “What we bring is the oil and gas expertise.”

Howard said he anticipates mostly natural gas liquids and crude will be handled at the Live Oak Railroad, which should help fill something of a rail yard void.

“In between Gardendale and Gonzales, there isn’t a rail hub that could offer multiple services,” Howard said.

“This is a large site. Multiple people can solve their logistics problems with this facility.”

The railroad will be off U.S. 281 near the intersection of County Road 313, about halfway between San Antonio and Corpus Christi. It’s about 2.5 miles south of Three Rivers.

Seay said the site was chosen for its access to U.S. 281 and to pipelines that can move product out of the region toward coastal refineries. But trucks driving to the site won’t be far from U.S. 59, Interstate 37 and Texas 72, one of the major east-west routes across the shale play.

“We have multiple ways of getting out of the region,” Seay said.

An industrial park is being planned, with the expectation that companies will want to build or lease their own facilities on-site. There are also plans for a “community dock” in the rail yard that can be used for one-off deals if a company simply needs to get some equipment delivered by rail.

All across South Texas, rail yards are adding track to service the oil and gas industry.

In Hondo, Hondo Railway has grown from 13,000 feet of track to 80,000 feet, moving primarily fracturing sand, crude oil, ethanol and cornstarch.

At Port San Antonio’s East Kelly Railport, Watco Cos. recently expanded the tracks from four miles to almost eight miles within the 350-acre site.

In Gardendale, in LaSalle County, about halfway between San Antonio and Laredo, Gardendale Railroad has grown from 1,600 feet of track to 130,000 feet of track.

And near Gonzales, the Texas, Gonzales & Northern Railway Co. started with 12 miles of track and since last June has added 13 more.