Crude by rail gets a boost in the Permian Basin

The developers of San Antonio’s Mission Rail Park, which will serve the Eagle Ford Shale, said Tuesday they are starting construction on a rail park in West Texas.

The Permian Rail Park, located between Big Spring and Midland, will be in the heart of the Wolfcamp and Cline Shale plays.

Developer Kyle Kinsel said the rail park, scheduled to open in the second quarter of 2014, will be the only major rail location on the eastern side of the Permian Basin.

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He and Frontier Logistics announced they will start construction soon on a 550-acre industrial rail park six miles west of Big Spring, intended to serve tenants ranging from large distribution and manufacturing centers to those offering crude oil storage, blending and processing, as well as a rail transport hub.

The property is on Interstate 20, with rail access at the back, allowing for the development of a rail crude loading facility. The developers estimate that would cost about $12 million.

Kinsel said the property also is located within five miles of 9 major pipelines.

Rail is used to bring in materials to drill, Kinsel noted, including sand, pipe, cement and chemicals.

And while pipelines are used to move crude oil, natural gas liquids and other hydrocarbons, rail is an increasingly popular option for moving crude oil from shale plays.

Kinder Morgan Energy Partners this spring dropped plans to build its Freedom Pipeline, which it intended to carry crude oil from the Permian Basin to California, after too few shippers expressed interest.

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Instead, the company said it would focus on its own crude-by-rail options on the West Coast and in Texas.

While shipping crude by pipeline is generally cheaper, pipeline owners usually require longterm contracts, while rail gives producers more flexibility.

The Permian Rail Park will be similar to the Mission Rail Park, which is set to begin operations in August on San Antonio’s south side.

One tenant is lined up already for the Permian park, Kinsel said, and talks are on-going with others.