Railroad industry surges during oil boom in southeast New Mexico

Extraction continues to grow in Permian Basin and southeast New Mexico, bringing more resources to the surface.

But products like oil and potash need to get out of the area and to market in increasing speeds and quantities.

Many companies take to the rails.

Rail cars traveling through the Carlsbad area almost tripled during the region’s recent oil boom, as more facilities were built, and more products needed to be moved.

In November 2016, about 150 rail cars daily – or about 4,250 per month – passed through the Carlsbad Subdivision that runs from Clovis to Loving, per data from Southwestern Railroads.

Operations shifted from Southwestern to Burlington Northern Santa Fe (BNSF) in 2017.

That year saw about 400 cars per day pass through the division, or about 12,000 per month.

Southwestern Senior Vice President Bruce Carswell said the increase is no surprise amid significant growth in southeast New Mexico’s oil and gas industry.

“It tends to trend with economic cycles,” Carswell said. “A general view is what’s going on in the Permian (Basin) is phenomenal. It’s definitely created a lot more opportunities for other industries.”

That means more investment from rail companies to better maintain the rails during the uptick in volume.

Since it took over the region, BNSF has replaced roughly 36 miles of rail, over 43,000 ties, switches and bridges, records show.

Twenty-five crossings have been replaced or rehabbed at no cost to the local road authorities, said BNSF spokesman Joe Sloan.

Since 2000, Sloan said BNSF added more than $60 billion in capital to its overall network.

In 2018, the company spent $3.4 billion, mostly on rail maintenance and efforts to limit unscheduled outages.

About $500 million of that was spent on expansion and efficiency projects, records show.

Construction of a third mainline connected Belen to Dalies, and improving traffic and capacity in the area, with 10 miles of new track constructed, and five bridges and four grade crossings.

Amarillo, Texas – which Sloan called a “high density” area for the region and a change point for crew — saw five miles of rail constructed

“Our capital investments play a key role in our ability to operate a safe and reliable network as well as meet the needs of our customers,” he said. “Our attention to safety and service, along with our investments in our network, provide a solid foundation for our ability to grow with our customers today and in the future.”

Chief Executive Officer of CIG Logistics Jonathan Green said his company uses BNSF rail car extensively in the region, transporting sand for hydraulic fracturing, pipe, crude, diesel and potash.

He said the sand makes up about 60 percent of CIG’s business, a resource necessary to perform hydraulic fracturing – a practice experts said was a major cause of the recent boom in southeast New Mexico and West Texas.

To Carswell, harnessing the opportunities of the boom means proximity and efficiency.

That’s why CIG owns a large rail terminal in Loving – to get close to the action.

It also means that one rail car can carry about four and a half truckloads of product, saving money and time.

“We needed to get well consumables into that market,” he said. “The closer you can get to the well, the better. The goal for our business is to be as close as possible. Rail only goes where rail is built.”

But during the recent boom, frac sand has seen some decline, Carswell said, as companies are opting to transport their own sand.

But crude oil and pipe products are up, he said, as more infrastructure is needed to transport larger quantities of crude of the Permian, but bring more infrastructure in.

“I think we’re in a new paradigm in the oil and gas industry,” Carswell said. “You’re going to see a lot less volatile cycles. You’re not going to have booms and busts. It’s going to be steady activity.”

That steady activity is a sign that the region is moving toward stronger energy prominence, which justifies the expansion of activity by logistics companies like CIG, he said.

“The Permian is going to be the real swing in global demand,” Carswell said. “We’re just in a different world right now.”

But that boom in the Permian, and subsequent influx of activity brought more traffic and danger on the road.

Robert McEntyre, spokesman for the New Mexico Oil and Gas Association said growth in the rail industry could be part of the solution to snarling traffic in Carlsbad and southeast New Mexico.

“Rail has become an important component of the logistics network in the southeast because of requirements to get products out of the Permian,” he said. “Because of congestion on the roads and the traffic, rail has figured in to moving product quicker and at a higher volume.”

And growth in rail means more investment in the region, McEntyre said, along with other industries that serve oil and gas.

“Like other industries that operate in and around the oil and gas industry, it’s not surprising to see the rail industry grow,” he said. “With the traffic and the bottlenecks out there, this could alleviate some of the issues.”

But rail isn’t the only type of infrastructure that needs to grow to bring what some experts called an unprecedented supply of oil coming out of the region at to market.

McEntyre pointed to roads and pipeline as other necessary pieces of the infrastructural demands the boom created.

“We still need to invest in new infrastructure and maintain current infrastructure,” he said. “We also need a combination of increased investment in roads and pipelines.”

It’s not just oil and gas that is seeing growth in its production and usage of rail transport.

Tonk Chester, spokesman for Mosaic Potash, said the company saw its sales steadily growing annually in recent years, as more customers are using potash-based fertilizers.

That means more rail cars and more product being transported throughout and out of the region.

Chester said BNSF has kept up with demand, as the primary means of transporting the ore.

“They (BNSF) are delivering cars to us as needed,” he said. “They’re meeting our needs. We’ve been getting creative in getting new customers. We’re very hands-on.”

Adrian Hedden can be reached at 575-628-5516, achedden@currentargus.com or @AdrianHedden on Twitter.

——

©2019 the Carlsbad Current-Argus (Carlsbad, N.M.)

Visit the Carlsbad Current-Argus (Carlsbad, N.M.) at www.currentargus.com

Distributed by Tribune Content Agency, LLC.


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