A Colorado company last week added its name to a growing list of companies building crude-oil rail loading facilities in Wyoming, but company officials say their project has a leg up on the rest.
While other projects are built on the periphery of the expanding shale oil play in northeast and central Wyoming, Meritage Midstream's facility will be in the heart of the play, south of Gillette.
But that area is also the heart of coal country, where miners tie up rail lines with a constant flow of exported product. So Meritage found a coal company -- St. Louis-based Arch Coal, owner of the Black Thunder mine -- willing to form a partnership and share some rail capacity.
"Everybody has for a long time considered the Gillette to Douglas corridor to be coal country, with rail traffic 100 percent coal," said Steve Huckaby, chief executive officer of Meritage. "What that location does for us is it puts us in the middle of the play, and that allows us to more economically gather crude oil without having to truck it."
The company -- which will have a 60-40 ownership split with Arch as minority owner -- will build and operate a facility on the reclaimed far east side of Arch's mining complex, utilizing one of the company's less-used rail loops.
The coal market's recent decline allowed some ability to share the facilities with Arch, which in 2012 produced about 93 million tons from the mine, an 11 percent drop.
Huckaby expects to start shipping oil from the area by September.
The facility will be able to handle about 10,000 barrels of oil per day at first, with 120,000 barrels -- or about two fully-loaded trains of 110 cars -- leaving the facility daily at full build-out.
Trucks will at first supply the loading facility with most of its oil, with plans to rely more on pipelines later.
"The number of trucks it takes to support a horizontal well in this day and age is significant," he said. "If we can gather by pipeline, we’re going to minimize impact to land with the construction we’re going to do."
Huckaby didn't know Thursday just how many potential jobs would be created by the project, which is at least the fifth announced project in Wyoming since the turn of the year.
The development also follows a larger trend of oil gatherers and transporters shifting their efforts to moving product via rail rather than pipeline. Huckaby, like several others, cited rail's flexibility as a driver for his company's involvement.
"The great thing about rail is the optionality that it gives you versus a pipeline," he said. "That includes the West Coast, East Coast and Gulf Coast, although the gulf’s getting a little saturated."
Huckaby said most of the product moving through his facility -- which will come from the Wyoming Powder River Basin -- is likely to end up on the West Coast.
The project will be Meritage's first oil-by-rail loading facility. The company has also worked as a producer in the Eagle Ford shale play in Texas.
Huckaby said he expects his project to be unlike any of the other oil-to-rail projects announced in Wyoming.
"It's a unique project in that you’ve really got oil and gas working together with coal," he said. "We're traditionally competitors for power supply. You don’t see this kind of alliance every day."