CN (TSX: CNR) (NYSE: CNI) announced today it will start serving a new state-of-the art frac sand producer on its Wisconsin rail network in December 2013.
The production facility of Source Energy Services (SES), formerly Canadian Sand and Proppants, in Weyerhaeuser, Wis., is located on CN's rehabilitated Barron Subdivision and will have an annual production capacity of 1.2 million tons of high-grade sands, rising to 2 million tons by the third quarter of 2014. In 2012, CN spent US$35 million to restore a 40-mile segment of the subdivision between Ladysmith and Poskin, Wis., to better serve the frac sand market.
CN has 11 frac sand facilities on its network in Wisconsin, which is seeing a substantial increase in frac sand production because of its reserves of high-quality and in-demand sands. These industrial sands are used by the oil and gas industry in the hydraulic fracturing process to hold shale fractures open to let natural gas and oil flow out.
Brad Thomson, president and chief executive officer of Calgary, Alta.-based SES, said: "SES is excited to partner with CN on this project, which will advance our goal of becoming a major player in the frac sand industry. In conjunction with the opening of the production facility in Wisconsin, SES will also bring on-line the largest frac sand terminal in the Western Canadian Sedimentary Basin in Wembley, Alta., on CN's network near Grande Prairie. With a loop track and on-site storage capacity of 40,000 metric tonnes of sand, this will be SES's ninth and largest terminal on a network that spans North America, from Ft. Nelson, B.C., to Three Rivers, Tex.
"Working with CN will position us strongly in the frac sand marketplace with timely rail access to Western Canadian shales and other basins throughout the United States and Canada."
Claude Mongeau, CN president and chief executive officer, said: "CN's network is uniquely positioned to provide Wisconsin frac sand producers efficient access to key North American shale deposits.
"In addition to our investment on the Barron Sub in 2012, CN accelerated work this year on the US$33 million-rehabilitation of 74 miles of track between Wisconsin Rapids and Blair, Wis. This will increase car-loading capacity and train velocity for the growing frac sand supply chains.
"Over the past five years, CN's frac sand market has grown by nearly 300 per cent, rising to more than 50,000 carloads in 2013. Our end-to-end service focus has supported that growth, and we expect to achieve C$300 million in frac sand revenue by 2015."
CN is a true backbone of the economy, transporting approximately C$250 billion worth of goods annually for a wide range of business sectors, ranging from resource products to manufactured products to consumer goods, across a rail network spanning Canada and mid-America, from the Atlantic and Pacific oceans to the Gulf of Mexico. CN - Canadian National Railway Company, along with its operating railway subsidiaries -- serves the ports of Vancouver, Prince Rupert, B.C., Montreal, Halifax, New Orleans, and Mobile, Ala., and the metropolitan areas of Toronto, Chicago, Detroit, Duluth, Minn./Superior, Wis., Green Bay, Wis., Minneapolis/St. Paul, Memphis, and Jackson, Miss., with connections to all points in North America.
