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Continued: Oil boom gives railroads new life

  • Article by: ADAM BELZ , Star Tribune
  • Last update: August 18, 2012 - 5:33 PM

CAMERON, WIS. - The last time a train crawled east out of Cameron, rolling through town at about 5 miles per hour, a railroad worker stood on the front of the locomotive, peering at the warped rail and broken ties to make sure the train wouldn't slip off the track.

The railroad gave the line over to weeds and saplings for more than a decade. The state almost turned it into a bike trail.

But now Canadian National Railway is spending $35 million to rebuild the track. Why? Frac sand.

Voracious demand for the hard, round sand of Wisconsin and Minnesota has abruptly reversed a decades-long decline in the region's railroads. Stacks of fresh railroad ties sit in bundles along lines heading four directions from Cameron, a small town 90 miles northeast of the Twin Cities. Construction crews swarm over rail crossings at Weyerhaeuser and rebuild a century-old bridge over Eagle Creek just north of Chippewa Falls.

Hydraulic fracturing -- the oil drilling technique widely known as "fracking" -- has created a major new business for railroads, because each horizontal well requires between 3,000 and 10,000 tons of sand. Drillers in North Dakota and elsewhere need the sand -- together with water, chemicals and organic lubricants -- to break up shale thousands of feet underground that holds natural gas and oil.

The demand -- about 60 new sand mines are in the works in Wisconsin -- is reviving sleepy trade routes. Railroads are striking deals with a spate of new sand processing plants, bringing dormant rail lines back into service, upgrading tracks and building rail yards and loading facilities across the Upper Midwest.

That has helped small-town industry that depends on freight trains, helping preserve jobs and clearing the way for industrial development. If sand mining takes off in southeast Minnesota the way it has in Wisconsin -- something many citizens and conservationists would rather avoid -- the result will be the same.

"Anything to bring people around the area is good," said Don Szozda, who owns Barney's Meats in Weyerhaeuser, Wis., and whose father-in-law was the last rail dispatcher in the town. "It'll be interesting to have a train coming through here again."

All the major railroads are expanding across the region to accommodate sand in one way or another.

In two years, Union Pacific recorded a 265 percent increase in frac sand shipments. The railroad has rebuilt interchanges in Wisconsin, lengthened track at a Mankato rail yard and will lengthen another track this year. The company built a side track at Bricelyn, Minn., lengthened several tracks at a rail yard in Council Bluffs, Iowa, and is considering four more yard improvements in Wisconsin and Iowa.

Over the past six months, Canadian Pacific has struck deals with new sand-processing plants in Tunnel City, Oakdale and Sparta, Wis. The company is building a facility in Makoti, N.D., where sand will be loaded on trucks and driven to wells in the Bakken oil fields of North Dakota.

Unless energy companies figure out a less expensive way to get oil and gas out of the ground, they're going to need sand from Wisconsin and Minnesota, said Jean-Jacques Ruest, chief marketing officer for Canadian National. He expects railroads to be busy in western Wisconsin for 10 years, probably 20, maybe 30.

Boost to industry

The added rail service doesn't only benefit energy companies. For Terry Schissel, president of Shadow Plastics, fracking means his business can survive in Rice Lake.

Thirteen years ago, companies along the Union Pacific line that runs north from Chippewa Falls through Bloomer, New Auburn and Chetek faced an existential threat: the possibility of no rail service.

Shadow Plastics, which employs 35 people, had just built a new plant on the south side of Rice Lake, including a railroad spur where the company gets 200,000 pound loads of tiny plastic pellets by rail. The company pumps the pellets into machines that melt the plastic into liquid and blow out industrial plastic bags.

Schissel either had to build a loading facility on an active railroad dozens of miles away and buy or rent a fleet of trucks, or he had to move the company. "We were freaking out," Schissel said. "We'd made the commitment to rebuild here and spent all that money."

Some 1,000 jobs depended on the rail connection, which had become a tenuous lifeline for companies like Jennie-O Turkey, Bell Pole and Lumber, ABC Truss and Bloomer Plastics.

So the counties and businesses formed a coalition called the Western Wisconsin Rail Transit Authority, which got federal and state grants to keep the line alive. The authority hired Progressive Rail, a Lakeville company, to operate trains on the line, and for five years the company operated there at a loss.

Sand boom

In 2011, the former Enron -- now called EOG Resources -- opened one of the largest sand processing plants in the United States on the north edge of Chippewa Falls. Energy companies have since built three more plants to the north, all within 2 miles of New Auburn. A fourth is going up along Old Highway 53.

The construction site with its giant blue silos, towering cranes, workers climbing on rafters, and brand-new rail yard "looks like Valleyfair," says Jeremy Urlacher, a vice president at Progressive Rail who just moved from the Twin Cities to Chetek so he can keep up with track maintenance.

On a white-sky Wednesday in August, on-and-off showers sprayed across the uneven patchwork of field, forest, lake and wetland around New Auburn, which has become the heart of sand country. Rural Wisconsin chronicler Michael Perry summarized New Auburn at the turn of the millennia by writing, "Maybe that's all you need to know about this town -- the train doesn't stop here anymore."

Now the train stops. Hopper cars full of cream-colored sand sit on the tracks for a mile north of town. Progressive just secured a 30-year lease on the rail line and will renovate it for several years. Instead of 2,000 rail cars per year, the line now carries 3,000 cars per month.

Progressive Rail president Dave Fellon sees railroads as the bedrock of the industrial economy, and himself as an industrial developer, trying to persuade companies to expand or build along the rail.

"We are not just focusing on frac," Fellon said. "The projects I'm working on today are three-quarters non-frac, and a quarter frac. And these are significant industrial development projects, the big ones."

In aerial photos, ghosts of railroads still trace paths across southeast Minnesota -- a tree line angling through a cornfield north of Eyota, a meandering bike trail that connects Red Wing and Cannon Falls.

No rail has been rebuilt there, but if a whole cluster of mines opens for business, the railroads might perk up, said Dave Christianson, a freight and rail planner at the Minnesota Department of Transportation.

"St. Charles definitely is the center of projected sand mining," Christianson said. "You could very easily see some branch lines come off the main line at St. Charles to try to get closer to the mines."

He puts the odds at 50-50 for rail companies to rebuild old lines in Minnesota. Canadian Pacific has announced no plans to add lines. It already has several deals in Wisconsin along existing tracks.

"It's evolving," said Ed Greenberg, a spokesman for Canadian Pacific. "We're continuing to work with the energy industry on where we can provide efficient and rail-ready service."

Adam Belz • 612-673-4405

  • related content

  • About the demand for sand

    Saturday August 18, 2012

    Railroads ship massive amounts of sand to North Dakota and other states where hydraulic fracturing, or "fracking," is used to recover oil and gas.

  • Jay Olds, above, loaded sand into a train near New Auburn, Wis., this month. Several railroad companies are rebuilding or reviving lines because of the demand for sand.

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