Plains All American - U.S. Development Corp Reach $500 Million Rail Deal

Van Hook Terminal - New Town, ND
Van Hook Terminal - New Town, ND

Plains All American Pipeline (PAA) has reached a $500 million deal to buy four rail facilities from U.S. Development Group. The four facilities are rail terminals:

The three crude terminals have daily loading capacity of 85,000 b/d and the rail terminal at St. James has unloading capacity of 140,000 b/d. An unloading facility is also planned for Bakersfield California.

The Van Hook Crude Terminal received oil by truck in New Town, ND, has capacity for 208 rail cars, and can move as much as 65,000 b/d. There is also 12,000 bbls of storage onsite. The terminal is serviced by Canadian Pacific Railroad. Most of the crude moving from the terminal ends up in St. James, LA, where the facility can handle 300 loaded railcars at one time or 130,000 b/d. The St. James Rail Terminal also ties into several pipelines, including one owned by PAA.

"These assets represent a very attractive addition to our existing North American rail activities...." said Greg L. Armstrong, Chairman and CEO of PAA. "Given recent and projected increases in North American crude oil production and volumetric and quality imbalances expected to occur in certain regions over the next several years, we believe that strategically located rail loading and unloading assets will continue to play an important role in the transportation of crude oil in North America."

Crude oil pricing is as dynamic as ever across the U.S. Growing production in the Bakken and West Texas have put downward pressure on WTI (priced at Cushing, OK). On December 7, 2012, WTI was trading at a little less than $87 / bbl and Brent crude was trading a little over $107 / bbl. Crude oil in Colorado and North Dakota was trading between $70-$80 / bbl. Those are big differentials that midstream companies will look to capitalize on. Rail is the easiest, but pipeline developments will follow. Plains also has an extensive NGL rail network and expects to have as many as 6,700 rail cars under lease by year-end 2013.

Plains All American Pipeline's company wide crude oil loading capacity is now 250,000 b/d and unloading capacity is 335,000 b/d on the East Coast, Gulf Coast, and West Coast.

Read the full press release at paalp.com