Canadian National Railway is looking to tap into the growing North American demand for shale gas by launching service this fall to a new frack sand terminal being built in northwestern Alberta.
The railway said Wednesday it has signed an agreement with Di-Corp, a distributor of specialty chemicals and equipment to the mining industry, that is building a facility to handle the material used in the hydraulic fracturing process that is growing in popularity, particularly in the United States.
Financial details were not disclosed.
Service will begin in November to the eight-hectare terminal north of Grande Prairie, Alta., that will have an annual through-put capacity of nearly 500,000 tonnes of fracking sand. The facility will have three tracks capable of holding 44 rail cars for unloading.
Di-Corp marketing vice-president Trevor Derksen said the project will help accommodate the existing and expected growth in frack sand demand in Western Canada.
“CN is an outstanding partner, providing cost-effective and reliable logistics services from frack sand origin in the Wisconsin Basin to destinations in Western Canada,” he stated in a news release.
Frack sand is used by the oil and gas industry in the fracking process to extract natural gas and oil from shale fractures.
Critics say the process, which injects a blend of water, sand and chemicals underground to crack the rock, raises environmental red flags because of what they say are potential effects on groundwater.
Last month, the railway announced it was accelerating work on the $33-million (U.S.) upgrade of a 119-kilometre rail line between Wisconsin Rapids and Blair, Wis., to increase car-loading capacity and train speeds for the growing frack sand business. That’s on top of the $35-million it spent last year to restore a 64-kilometre rail line between Ladysmith and Poskin, Wis., to serve the frack sand market.
Analyst Walter Spracklin of RBC Dominion Securities said the rail upgrades support new business that is expected from the agreement with Di-Corp.
“We view this announcement positively as it aligns with management’s strategy of opening up new markets through supply-chain collaboration,” he wrote in a report.
“In addition, this deal builds on CN’s competitive advantage with superior network access into the Canadian oil sands.”