NorthStar Midstream

In the real estate industry, “location” is always key. But for NorthStar Midstream, this is an important factor as well, because the Minneapolis-based company is focused on developing and owning rail terminal facilities and transporting crude oil and sand for its clients, CEO Jon Hempel says.

NorthStar began as a venture that Hempel and his partner, COO Brian Jensen, started in 2012 to build a rail terminal in the Bakken Shale. Eventually, “We found a piece of land [in East Fairview, N.D.], that made sense to put a rail project on,” he recalls.

“That was the genesis of NorthStar,” he continues, noting that the company has since formed a joint venture with Highstar Capital, an infrastructure investment firm based in New York City.

With Highstar’s backing, NorthStar has become a full-service midstream firm, Hempel says. “We are going to be the largest terminal in the Bakken,” he predicts. “We’re going to have multiple assets, ranging from rail to pipelines.”

Project Progress
NorthStar’s rail terminal project in East Fairview covers 400 acres and is divided into two phases, Hempel says. The first, which opened in December, consists of an inbound terminal that transports sand for the E&P industry.

“The second portion is the outbound crude terminal,” he says, noting that NorthStar expects it to be operating in May.

Although the East Fairview location only processed 150 cars in December, Hempel predicts that number will grow. “Our capacity on the inbound side will be [up to] 1,000,” he says, noting that the outbound side will process 120,000 barrels per day.

The terminal’s features include five crude storage tanks that can each hold up to 103,000 barrels of oil. “We also have 12 LACTs (truck lease automatic custody transfer units) for receiving truck barrels at the terminal,” Hempel adds.

The company also is at work on a pipeline connection at the terminal, NST Express. “NST Express will run from the Alexander area in North Dakota to our terminal,” Hempel says, noting that it will be able to transfer 100,000 barrels of oil per day. “That project will break ground in third quarter 2015.”

NorthStar Pride
Hempel is proud of how far he and Jensen have come with NorthStar. Although it is still early, “[We’ve been successful] with being able to put out team and project together and bring it to fruition,” Hempel says. “It has gone from the big idea phase to reality.”

But the company has encountered hurdles along the way. “The initial challenges were completing entitlements to put our use on the land in North Dakota,” he recalls.

NorthStar also had to find “customers and users that had a need for the project we envisioned,” Hempel recalls. “We were able to accomplish both of those, which led to our ability to start construction. We weren’t going to make an investment like this without customers in hand.”

NorthStar is well positioned for success, he asserts. The terminal’s location places it in McKenzie County, “the No. 1 producing county in the state of North Dakota,” he says.

“Our customers on both the inbound and outbound crude side of the business have loved our location,” he says. “We’re very well suited for the basin’s logistics.”

The terminal will be a wise investment for its customers, since they will be able to lower their truck costs, Hempel says. “It’s all about logistics costs in going from point A to point B with all the stops [in between],” he says.

Sophisticated Systems
NorthStar has invested deeply in technology, Hempel says. “We’re putting some pretty sophisticated logistics systems in place, particularly on the inbound side,” he explains. “It’s full supply chain visibility that we’re offering our customers, from origin to final destination through our terminal.”

With the use of its systems, NorthStar can know where its clients’ products are at any point in the supply chain, as well as monitor inventory levels. “That allows us to manage our terminal’s efficiency and workflow,” he says. “It allows our customers to do the same, and they have the visibility to know where everything is.”

Best of the Best
Hempel is proud of NorthStar’s team, including Jensen, who made the move to North Dakota for the business. “He is overseeing all the construction for the terminal,” Hempel describes. “He’s up there, working hard and making sure [it is done right].”

He also praises Vice President of Operations Mike Gibson, who comes with more than 20 years’ experience in the rail industry, who “has really had to step up and find [new workers],” Hempel says; and Senior Vice President of Business Development, Terminals Mark Hetherington, who is tasked with finding customer prospects.

With the addition of Terminal Manager Keith Barksdale, “They’ve been hiring our staff to run the terminal up there,” Hempel says. “That’s been a big undertaking – to find 50 people with the [right skills] to run it.”

When recruiting, NorthStar seeks only the “best of the best,” he says, noting that it looks for people with experience and a customer-centric philosophy. “We’re going to push that [philosophy] all the way through our organization.”

Hempel adds that NorthStar offers its employees a comprehensive benefits package and training. But, he asserts, it isn’t interested in overworking them. “It’s probably a little different of an approach than what most folks are using,” he says. “But that’s going to help us in two respects: retention and attracting people.”

Growing the Footprint
NorthStar plans to grow beyond North Dakota, Hempel says. “We’re looking for opportunities on the West Coast, with the goal there to have an origin for inbound business and a destination for outbound business,” he says.

“We’ve got some strategic alliances with our Highstar portfolio companies,” he says, noting that these include Ports America, which manages ports around the United States. “We’ve got a great opportunity to provide that connection to their customers, getting from the port to our terminal.

“[There’s also] opportunities for us focused on the midstream space,” he says. “We’re expanding our geographical footprints, as well.”